Alistair Burt: We have no plans to change our position on Hamas. The Quartet principles that my hon. Friend sets out remain the benchmark to which Hamas should move towards—that is, a rejection of violence, a recognition of the state of Israel and an acceptance of previous agreements.

William Hague: I did not see the reports to which my hon. Friend refers. Clearly, he has seen reports that he found very disturbing and I hope that he will take up those directly with al-Jazeera. Al-Jazeera now broadcasts a very wide variety of material, but I hope that it will in no way encourage hate or the commissioning of crimes; we must be vigilant against that.

William Hague: It would be surprising if there were not differing voices and internal tensions on these subjects. Clearly, many issues are moving in the middle east, with the changed situation in Egypt and pressure on the Syrian Government. Hamas has been encouraged by the new Government in Egypt to enter into the political reconciliation with Fatah, as discussed earlier. I believe that it might also feel less secure in its position in Syria. These are forces now at work on Hamas, and it is important in the light of the changes in the middle east that, as Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for North East Bedfordshire (Alistair Burt) has been saying, it makes concrete movement towards acceptance of Quartet principles, which the whole world looks to it to respect.

Oliver Colvile: Does my hon. Friend agree that the proceeds of the diamonds should go to the Zimbabwean treasury, and what pressure can be placed on the Zimbabwean Government to ensure that civil society is included in the decision-making process?

Fiona Bruce: I thank the Minister for his response with regard to the treatment of minorities such as the Hazara population in Pakistan. What can also be done to encourage and support the protection of the rights of minorities more widely in Pakistan, such as Hindus,
	Christians and women, in light of accounts of human rights violations, such as forced conversion, forced marriage, beatings, rape, false imprisonment and even murder?

Grahame Morris: Let us be clear about the impact of the spending cuts on the Arabic division of the BBC World Service. In one month it will be forced to reduce its daily output of live TV news from 15 hours to seven and of live radio from 12 hours to seven, and it will also lose 44 of its Arabic staff. In light of the recent monumental events across the Arab world and the integral role of the BBC World Service as a provider of impartial information, will the Foreign Secretary act now to save this valuable service?

Andrew Miller: In light of the second bombing of the gas pipelines from Egypt to Israel and Jordan, what conversations has the right hon. Gentleman had with the new regime in Egypt to stress the importance of the 30-year peace treaty between Israel and Egypt?

David Lidington: My hon. Friend is right that that is a potential challenge to the Dayton accord and it is not something that the British Government regard as acceptable. We are emphasising to our European partners and other members of the international community that we all need to work to strengthen the statehood of Bosnia and the integration of its communities within a single country, and we should be prepared, if needs be, to invoke the Bonn powers to make clear that what the Republika Srpska is now proposing is simply not acceptable.

David Cameron: I thank the right hon. Gentleman for his statement and for the way he has made it. He is absolutely right to praise the police and security services, particularly those in the security services who never get public recognition for the work that they do to keep people in our country safe.
	The right hon. Gentleman is absolutely right to talk as strongly as he has about 9/11 and the memories people have of it. I am sure that everyone in the House remembers exactly where they were and what they were doing on that day, and how they felt, and he is right that we should use this moment to try to heal many of the divisions in our world.
	On the specific questions, the right hon. Gentleman asks about Pakistan and the question, which I think will come up a lot, about who knew what and what we will do to find out who knew what. What matters most of all, as I said, is to back the democratic leaders of Pakistan, to work with them and those involved in security and military matters and to try to hold discussions with them together, which is what I did on my last visit to Pakistan.
	On Afghanistan, the right hon. Gentleman asks how we can increase the urgency of a political settlement. That is absolutely the right thing to do, and again part of the answer lies in Pakistan and the discussions we can have with them to encourage all those involved to give up violence, to accept the basic tenets of the Afghan constitution and, critically, to renounce any link with al-Qaeda.
	The right hon. Gentleman asks what more can be done to deepen the democratic process in Egypt and Tunisia. My right hon. Friend the Foreign Secretary
	was in Egypt yesterday. One of the key ways of doing this is through the European Union, and Britain, along with others, is pushing very hard for a total update of Europe’s relations with its neighbourhood to make them more attractive and something that has proper conditions attached to them.
	On Syria, the right hon. Gentleman asked what more can be done to step up the pressure. I agree that what is happening in Syria is unacceptable. We are leading a process in Europe of setting about applying proper pressure—an arms embargo and taking the association agreement off the table—and we are looking at further steps, including travel bans and asset freezes, and other things we can do to show that what is happening in Syria is unacceptable.
	On Libya, the right hon. Gentleman asks whether we will stick to UN resolution 1973. Yes, we will. What I would say, though, is that this does not mean just sticking with the existing set of things we are doing. All the time, we should be asking what more we can do to raise the diplomatic, military and sanctions pressure; and within all necessary measures to protect civilian life, I believe that there are many more things we can do and should do to keep the pressure up.
	The right hon. Gentleman is right that Hamas’s reaction is very regrettable. I do believe, though, that the middle east peace process is, if you like, the third leg of the strategy to fundamentally defeat al-Qaeda. The first leg is the attack on the terrorist network—the blow so successfully dealt yesterday—and the second leg is democracy and progress in the middle east, in north Africa and in Muslim countries, but the third leg is a middle east peace process that works. I am seeing Prime Minister Netanyahu tomorrow evening, and we will do everything we can in our power to encourage both sides to recognise the historic times that we are living in and the historic chance there is to forge a deal that will last.

David Cameron: My right hon. Friend is entirely right. Clearly, this was a painstaking operation—if you like, a painstaking piece of detective work—that went on for many, many months. I can tell from speaking to President Obama that this was not some chance opportunity that came up but a piece of very careful work put in place over months and an operation clearly carried out with great professionalism and skill.

David Cameron: I agree with the right hon. Gentleman, although I would say that there are two additional strands. One is dealing with problems of poverty, inequality and underachievement, which absolutely must be done, but separate to that is the whole bin Laden/al-Qaeda/extremist Islamist thread of painting Muslims and Muslim communities as somehow being in perpetual victimhood and saying that they can never successfully co-exist in western democratic societies. It is absolutely key that we target that ideology and challenge it, because in the end it is only by challenging the ideology that we will win this battle.

Bob Ainsworth: The brave and incredibly skilled individuals who carried out this operation deserve our profound gratitude, as do all those who put their lives on the line to protect us, including our own armed forces. In tackling the wider ideology of al-Qaeda, does the Prime Minister think that there are actions that we need to take abroad, as well as those that we need to take at home? The reconciliation track in Afghanistan is enormously important, and surely this operation gives us the opportunity to step up that activity. Did he talk to the President of the United States about that when they spoke, and if he did not, will he do so?

David Cameron: I thank my hon. Friend for his question, and I know that he suffered a loss in that Bali bomb. We can never bring back someone who has been lost, but he is right that the best tribute we can pay to the people who were lost in the murderous attacks in New York, London, Istanbul or Bali, is not only to roll up the terrorist network that has created so much hatred, poison and death, but to see the Arab and Muslim world move towards democracy and freedom. That would be the most fitting tribute of all.

David Cameron: The problem with that philosophical view of British foreign policy is that we live in too much of an interconnected world. The idea that we can just put the barrier up and say, “What happens in Pakistan or Afghanistan does not affect us,” is wrong. The fact is that 1.4 million people of Pakistani origin live in Britain and travel between here and Pakistan. The fact is that we were threatened from terrorism sourced from Afghanistan and the tribal lands of Pakistan. I am afraid that that sort of “stop the world, I want to get off” foreign policy option no longer exists in this interconnected world.

David Cameron: I have some sympathy with what my hon. Friend says. We are trying to deal with the problem in a number of ways. First, we are trying to sign a treaty with Pakistan on deportation with assurances, so that we can deport people of Pakistani citizenship and origin who may threaten this country back to Pakistan to be dealt with there. I discussed that with Prime Minister Gillani and President Zardari when I was there recently. However, we are also trying to reform the European Court of Human Rights from within, and my hon. Friend will be pleased to know that our right hon. and learned Friend the Justice Secretary had a very productive set of meetings with other Council members and there was widespread support for reforming the Court, so that it pays more attention to decisions taken by national courts.

Barry Gardiner: The Prime Minister famously once accused the Pakistani Government of facing both ways. Is it not now clear that, whichever way they were facing, Pakistan’s Inter-Services Intelligence was clearly focused on Abbottabad and the security compound there, and that the co-operation of which he spoke must now have as part of its condition the root and branch reform of the ISI? If it is not, the fight against terror will be doomed from the beginning.

David Cameron: The legal position and the legal advice is a matter for the United States. It was a US operation with US troops, so it is entirely a matter for that country. I think we should focus today on the fact that the world is undoubtedly better off without that man still being at large.

Richard Fuller: On that bright September morning, no one really seemed to give a fuss about anyone else’s religion, but over 20 years Osama bin Laden was responsible not only for the murder of innocents but for a raising of disadvantage for Muslims in many parts of the world. Does the Prime Minister agree that terrorists like Mr bin Laden abandon their faith the moment they determine to slaughter innocent people, and will he recommit himself to an open, inclusive society in this country, which includes our Muslim citizens?

David Cameron: My hon. Friend has put his question in the right way. A long-term commitment on the part of this country and, crucially, the United States to Pakistan is what is needed to help to convince Pakistan that together we will defeat this menace and give the country some prospect of peaceful progress. I have no doubt that that is President Zardari’s view. As my hon. Friend has said, he has suffered from terrorism himself, and has shown considerable courage in sending Pakistani troops into the Swat valley and south Waziristan to defeat terrorism. So yes, Pakistan does need our help and long-term commitment so that we can deal with this issue together.

Christopher Leslie: Indeed. Were it possible under the rules of order for the Opposition to table an amendment to increase the bank levy rate, we probably would have done so. However, we were unable to do so because of
	the slightly arcane rules of order. We need to examine the rationale behind the rate chosen by the Minister and understand why the Government moved from a threshold approach to triggering the bank levy, to a tax-free allowance of a certain amount before which banks would pay against the chargeable liabilities of the bank levy.
	We also need to understand whether the bank levy is, as my hon. Friend suggests, an adequate step when considered in the context of the wider economy and public finances. Ultimately, we need to understand whether the Treasury is being straight with the public and honest about the taxes that the banks will pay over the years ahead. We have debated the Government’s approach to the banking sector before, and we look forward to the final report of the Vickers commission on the state of competition and regulation of the banks so that never again can these institutions take such extreme risks and gambles that land on the lap of the taxpayer when the going gets tough, as they did before the credit crunch.

Duncan Hames: In defending the bank bonus tax and the revenue that would have been raised by continuing with it, what allowance has the hon. Gentleman made for increasing levels of legal tax avoidance by those no-doubt skilful bankers who would have been keen to avoid paying tax under that regime?

Christopher Leslie: The ongoing implicit taxpayer guarantee for the banks is very significant. Indeed, I understand that the Bank of England has suggested in its financial stability reports that an implied subsidy of about £100 billion each year offers a safety net for the profitability of the banks. Without that taxpayer guarantee, banks’ borrowing costs would be higher, they would not be able to make such great profits and, therefore, their remuneration and bonuses could not be so high. So, many bonuses and excessive profits are being made on the back of the taxpayer, but does that encourage the Treasury to take action? It certainly does not.

Christopher Leslie: My hon. Friend is entirely right, and that is why we have to take a step back and look at the context of today’s debate. The Government are clearly still on the side of the big banks at a time not just when the living standards and wages of ordinary people are
	being frozen or reduced, but when vital public services are being slashed. Indeed, it is worth reminding ourselves of the consequences of the cuts that the Government are pursuing.
	Teaching assistants, youth workers, library staff and lollipop ladies are being made redundant; binmen, street cleaners, environmental health officers and park keepers are disappearing from our neighbourhoods; police detectives, forensic scientists, 999 operatives and police community support officers are no longer affordable in the fight against crime; and hospital cleaners, nurses, paramedics and wards clerks are having their posts eradicated when the NHS needs them more than ever. How dare Ministers say that we are all in this together when they take such a weak and feeble approach to the banks.

Christopher Leslie: My hon. Friend’s arguments become increasingly attractive, and he makes an important point. The bank bonus tax, which the previous Labour Government introduced, appeared at first to be modest,
	but in fact the yield was very significant indeed. Did the banks collapse as a result of the bonus levy? No. Did they all flee abroad to relocate somewhere else, as threatened? Absolutely not. So, too, with the continuing scale of the bonus pot, which has hardly changed at all, it is absolutely right that we look to reinstitute the levy this year, along with a decent bank levy, as we are discussing today.
	Hon. Members will know that the concept of a bank levy was first developed at the G20 summit in Pittsburgh in 2009, and then championed by my right hon. Friend the former Prime Minister and taken forward by the International Monetary Fund in its report, which aimed to encourage less risky funding to enhance financial stability. Two broad conclusions were reached at the Pittsburgh summit. There was a call for a financial activities tax, or financial transactions tax, which we need to debate another time when we consider some of the extra levies that might be put on to activities. The Chancellor of the Exchequer himself still professes to be in favour of a financial activities tax, although he has done absolutely nothing to advocate it in ECOFIN or in other financial meetings around the world, so we will see whether anything comes of his repeated promises to pursue it.
	The second prong of the IMF’s report was a financial stability contribution, otherwise known as a bank levy, to be charged on equities and liabilities rather than assets or profits because of the need to disincentivise dangerous potential charges such as those that landed on the taxpayer during the credit crunch. The bank levy is a sensible idea in theory, and we broadly support it. However, the yield suggested in the Bill—only £2.6 billion—is not just small but pathetic by international standards when compared with the rate being pursued in other countries. It is perplexing that Ministers settled on that figure, and there has never been any evidential basis published for why they did so. Will the Minister clarify why the Chancellor chose the figure of £2.6 billion, as that seems to be the pole around which all aspects of the bank levy revolve? If there is any sense in which the revenue might go beyond that envelope, the Treasury tweaks and turns down the dials on the other aspects of the levy to squeeze it back into that £2.6 billion of revenue—the predetermined level that it put out to consultation last summer, never explaining why it was set. Compared with the substantial amounts of taxpayers’ money put up in the bail-out of the banks—£76 billion of shares purchased in the Royal Bank of Scotland and Lloyds, £250 billion of guarantees, another £280 billion of other insurances, and a further £100 billion of annual implied subsidy, according to the Bank of England—a £2.6 billion bank levy is very puny.
	It is interesting to look at the Treasury document that lists the respondents to the bank levy consultation. There were 44 respondents, all of which are major financial institutions.

Christopher Leslie: I will respond to the Minister when I have heard his comments. If he wants me to respond again, I am more than happy to have Government time dedicated to the general principles of bank taxation.
	The responses showed that the Treasury’s original design for the bank levy had a threshold that triggered payment of the levy for any organisations, institutions or banks with more than £20 billion of equity and liabilities. Ministers realised that that would yield £3.9 billion—nearly £1.5 billion more than the Treasury had expected—which, by the way, that would be more than enough to reverse all their police funding cuts, for example. What did the Chancellor do when he realised that the Treasury’s own design for the bank levy could yield £3.9 billion? Did Ministers think that this might be something they should go ahead with? Absolutely not—they gave in, capitulated, and converted the threshold into a tax-free allowance of £20 billion. Hon. Members will know that the Liberal Democrats have long made great play of the increase in personal allowances, which is pretty much the only thing they are getting out of the coalition as they cling on to it, and there might be a few hundred pounds in that here and there. How about having a tax free allowance of £20 billion? That is what they have decided to give the banks. The banks now do not need to pay on their liabilities below that amount.
	As I said, Ministers could have stuck to their guns and used their original design. In the response to the consultation, the Government gave their rationale for backing off that threshold and going for a tax free allowance:
	“Respondents”—
	remember, that is the 44 large banks—
	“were generally of the view that the threshold would create potent incentives for banks around the margin to structure their business in certain ways, or disincentives to grow, in order to avoid crossing the threshold… The Government accepts this argument”.
	That is a preposterous statement from the Treasury. The argument that the puny level at which the bank levy is being set—less than one tenth of 1% on the banks’ liabilities—is so punitive and high that it will stop banks from growing and prospering is ludicrous.

Graham Stringer: Is not the irony, when comparing pay cuts in the public sector with bankers’ bonuses, that in effect some bankers are public sector workers because the taxpayer has had to bail them out? Does my hon. Friend agree that where we mainly own a bank, such bonuses should not be paid while the bank is still in deficit?

Christopher Leslie: I wonder whether Hansard is able to record irony in my hon. Friend’s comments. Sometimes I wonder whether we need a new annotation in our proceedings, because I do not honestly think that he is showing sympathy. I think he is suggesting that even when there is an apparent reduction in bonuses, the sums of money involved are the sort for which our constituents would buy a lottery ticket in the hope of winning. If they won that amount it would change their lives tremendously, yet those life-changing sums of money are not even salaries but bonuses on top of salaries.
	I wish to talk about the rate at which the Government have chosen to set the bank levy, because it is a low rate by international standards. It is less than a third of the level that has been set in France, for example. Ministers will know that the rate varies in a number of jurisdictions, but I think that it is 0.25% in France. The levels involved are still quite small, but in Hungary it is 0.53%, in the USA it is 0.15%—although, as I said, it has not been enacted at this point—in Portugal it is 0.1%, and so on. It is to be only 0.078% here in the UK for short-term liabilities, and 0.039% for long-term liabilities, which is very small by international standards.

Christopher Leslie: As I said, the reason for the complexity is that all the variables in the design of the bank levy have to be amended because the Treasury wants to squash around that figure of £2.5 billion or £2.6 billion of revenue. In other words, the whole of the bank levy is being driven by that particular sum, which is a very odd way of designing a tax.

Christopher Leslie: In a moment, but I need to make some progress.
	I understand that there is a difference between short-term and long-term liabilities. However, what will be the impact on businesses in the real economy if short-term liabilities are less attractive to major banks? For example, if a small firm has a bank deposit of over £100,000—to protect its cash flow or whatever—that happens to be above the level of the deposit guarantee scheme, what is to stop the banks from raising their bank charges on SME deposit accounts to try to divest themselves of
	such short-term liabilities? That is an important point, because there will be consequences from the design of the bank levy. I would like the Minister to explain to the Committee why short-term liabilities and long-term liabilities have been divided in that way.
	Can the Minister explain the position on the reported legal challenge under European Union law, which I understand many in the banking community are watching carefully? The Hungarian Government have introduced a levy on their energy and telecoms sectors. I understand that a case has been taken—or is due to be taken—to the European Court to claim that a levy on a specific sector of the economy is somehow unfair or not possible. To what extent is the Minister confident that the case will not have a bearing on the implementation of a banking levy here in the UK?
	I would also be grateful if the Minister could answer the question about complexity and opacity in the bank levy accounting systems. As I understand it, overseas banks can sometimes not use IFRS—international financial reporting standards. If those banks do not use them, they will need to re-compute their chargeable equity and liabilities with reference to the UK’s GAAP—generally accepted accounting principles—or IFRS, in other words, by preparing a notional consolidation under those systems, including for branches. Is that anticipated to create a problem? What do the Government foresee as a solution to that level? Obviously we have banks that cross jurisdictions and use a series of different accounting platforms, so I would be grateful if the Minister could clarify some of the comments that have been made about that.
	However, it is the Government’s general approach to banks and banking taxation that concerns many hon. Members—a general approach that, as we know, is quite woeful. Hon. Members have already raised their concerns about some of the bonuses that we have seen and the breathtaking behaviour that the banks have engaged in, even though they were at the root cause of the credit crunch.
	That makes the Government’s tax giveaway to the banks even more staggering. The post-Budget reaction last June, when the bank levy was announced, was indeed positive from the bankers themselves. They enjoyed the Government’s decisions on the bank levy. One commentator said:
	“We’d expect most domestically-orientated banks…to be better off after four years than they were pre-Budget”,
	and a City insider said that
	“some banks will have a feeling of glee at the way this has worked out”.
	Clearly, we need to advocate a bank bonus tax to raise £3.5 billion, as it did before. That deserves to be repeated this year. Even if it were to raise just £2 billion, that would make a massive difference to our society and our economy. For example, we have calculated that such an amount could be used to establish a youth jobs fund—using a similar model to the future jobs fund, which this Government have abolished—creating 90,000 new youth jobs at a time when youth unemployment is close to 1 million, with one in five young people on the dole.
	That money could also help to construct 25,000 new homes for low-cost home ownership and affordable social renting. That would create tens of thousands of
	jobs in the construction industry and new apprenticeships alongside them. The money could also provide £200 million of funding for the regional growth fund, the Government’s rather lamentable replacement for the regional development agency funding. That could help to provide for regional projects and promote growth. The Government’s changes represent a two-thirds cut on the previous funding, and the first wave of £450 million in grants was several times oversubscribed with bids. We therefore need to revisit the regional growth fund, and a repeat of the bank bonus tax could support that.
	The bonuses being paid are still vast; they remain at eye-watering levels. Despite the smoke and mirrors of Project Merlin, in which Ministers broke their promises to take action despite the warm words in the coalition agreement, the bonuses remain high. Let us just remind ourselves of what the coalition agreement promised. The Conservatives and the Liberal Democrats said:
	“We will bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector; in developing these proposals, we will ensure they are effective in reducing risk.”
	That is on page 9 of the agreement, right up front among the promises that the coalition made.
	The Government could not even bring themselves to promote the basic transparency that we expect when it comes to bonuses and remuneration. The most that they could extract voluntarily from the banks in Project Merlin was an agreement to report anonymously on the total remuneration of the five highest paid senior executives of the bank, excluding board members. That is a weak and shameful compromise. The Government are not even forcing the banks to disclose all bonuses above £1 million, even though Labour’s legislation allows them to do so. That provision is already on the statute book.

Christopher Leslie: However, the alacrity and, almost, relish with which the Government have introduced some of their spending cuts makes me wonder whether their rewards for the bankers constitute a payback for the cover to get stuck into public investment in the way that they always wanted to do, and for which purpose many of them came into politics.
	The bank levy is a weak response to the debts that banks owe the taxpayer. The Government say that they want a big society, but they are happy to see public investment shrink and rewards for banks grow, built on the backs of taxpayers. It is a big society if you are a banker, but a very small society if you are not. Our amendment would at least make the Government pause and reflect on their increasingly untenable position—we hear that they are good at pausing and reflecting—and I urge Members to support it.

John Redwood: The Front-Bench team and I were at one on this issue: we were saying that was needed were better regulation and less regulation. The Government were regulating too many things badly. As I have just explained, they were regulating mortgage banks in a way that allowed all, or at least several, of them to be crippled and caused a great many problems. The hon. Gentleman is quite wrong about Baroness Thatcher: much stricter controls over cash and capital were imposed throughout her period in office, and, of course, no major bank went down during that period. The same cannot be said of 2007-10, when the requirements were much laxer, as I highlighted in the report, and when we ended up with banks going down.
	We are not here to debate past regulation, however; we are here to debate taxation. My purpose in sketching the history of this tragic situation is to express solidarity with all those who agree with the public mood, which is that we want to get a bigger return out of the banks, whatever we may think of the reasons why they are in
	their present position, but it is also to remind the House of a very important and salient fact, which is that two of the biggest banks are wholly or partially in state ownership or control. We are therefore talking about taxing ourselves in no small measure.
	The issue before Ministers is a little more complicated than the Labour spokesman has suggested, because there are two ways in which we can get cash out of the banks: one is to tax them now on their stream of revenue, or their assets and liabilities in the case of the bank levy tax; the other is to move more quickly to sell off those assets back into private sector ownership and, I hope, proper private sector risk taking. If we are to get the maximum receipt, we do not want to be taking too much money out of the banks in the short term by way of taxation, because for every £1 of tax we take out of them, we lose £5, £10 or £15, depending on the multiple we sell them on when we come to sell them.

Ian Lavery: I thank my hon. Friend for that question, which is a great way of introducing IPSA into the debate on the Finance Bill. I think we would have agreement on that point across the House.
	Let me get back to the discussion. Barclays bosses were compared to Somali pirates by one of their own shareholders, amid anger over their obscene bonuses. Shareholders lined up to vent their fury at the annual meeting, complaining that their dividends had plummeted while senior executives continued to enjoy huge pay packets. Another shareholder accused the executives of rank historical folly, saying:
	“In these times of austerity the seemingly excessive payments to senior bank staff seems to show the lack of wisdom reminiscent of Marie Antoinette saying let them eat cake.”
	HSBC has tried to seize the high ground by announcing a reduction in maximum bonuses for top bosses, but chief executives could still receive a package of more than £12.5 million this year. This mammoth pay deal comprises a salary of £1.25 million plus up to £7.5 million in long-term bonus shares and a possible £3.75 million annual bonus. Some reduction. That is why the bankers must pay their share, and why the Labour party are seeking this amendment to ensure that that happens.
	This recession was not made in Britain; it is a global recession. Let me set the scene for a minute or so. In the decade before the financial crisis, Labour cut Britain’s national debt and Britain’s deficit. Both were lower than the amounts we inherited from the Tories. Before the financial crash we had a lower national debt than America, France, Germany or Japan. The crisis was caused by the financial institutions—by these banks. Governments and central banks were also, of course, at
	fault, including in Britain, where we did not see it coming and should have been tougher in regulating the banks.
	The cry from those on the Conservative Benches, and from the City, for lighter regulation of the banks should have been totally ignored—and, yes, Labour should have been tougher on the banks. When the City and the Tories called for lighter regulation, we should have ignored them and been tougher still. Our priority, however, was to prevent recession turning into depression and to keep people in jobs. We always said that once the economy was growing strongly, tough decisions would be needed to get the deficit down again. The plan, as we all know, was to half the deficit in four years, including through a continuation of Labour’s bank bonus tax.
	The crisis was not the result of our spending on essential front-line services such as the NHS, schools, police, local authorities or any other public service.

Nicholas Dakin: I quote T. S. Eliot to remind us that bankers have played good parts in the world of culture, finance and many other things, and to remind us through his words of the pain of growth and rebirth. Economic growth is a difficult business. That is the business that we should be in, and we should make sure that bankers play their part in that.
	So bankers were not always about bonuses, and conversations about banks were not always about bonuses. Sadly, since the credit crunch and the global financial crisis, more attention has been focused on how great the anomaly is. We have heard the telephone-number salaries quoted and compared with the situation of people in our constituencies who are doing their best to bring their families up to be aspirational and to move forward in their lives.

Helen Goodman: I shall of course vote for the amendment this evening, but it does raise the question of whether it ought to be the Chancellor who reviews the bank levy or, because of the serious problems in the way in which Government have handled it, the Public Accounts Committee.

Nicholas Dakin: My hon. Friend makes an interesting and valid point, but amendment 9 proposes specifically that:
	“The Chancellor shall review the bank levy and publish a report, before 31 December 2011, on—(a) the Government’s analysis behind the rate and threshold chosen for the bank levy; (b) the adequacy of the bank levy in the context of other reforms to the wider banking system; and (c) the total tax revenues expected from banks across all categories of taxation in each year from 2011-12 to 2016-17.’.”
	That is what we are debating today, although my hon. Friend makes a good point.

Nicholas Dakin: Thank you, Mr Gray, although I think that the hon. Gentleman was reminding me of the part in my speech in which I referred to mandates, as it was important to reiterate that the Government have no mandate for the NHS reorganisation, for police cuts, for the VAT rise, for abolishing the future jobs fund or for trebling tuition fees, and they certainly have no mandate for cutting too fast and too deep. However, they do have a mandate for listening to the amendment we are considering today on the bank levy. There absolutely is a mandate on the bank levy.

Stella Creasy: It is a pleasure to follow my hon. Friend the Member for Scunthorpe (Nic Dakin) and his eloquent description of the problems facing us as a country. I rise to speak to clause 72 and amendment 9 because this debate is about the bank levy and whether it is being applied in the right way and to the correct extent.
	I support the amendment, because it seeks to address the challenges of any new legislation and answer the question of how we as a Parliament ensure that the legislation that we pass is effective at doing what we want it to do. The amendment would meet the challenge of asking whether bankers pay their fair share of the cost of dealing with the global financial crisis, just as we as taxpayers have paid more than our fair share, some might say, in trying to support them. That goes to the heart of today’s debate about clause 72 and what the Bill will do for the financial future of this country, so I support the amendment because it highlights the need to address the adequacy of the bank levy.
	I also pose a wider question about how the clause will work to ensure that all those who have benefited and, indeed, continue to benefit from the financial crisis that this country has endured pay their fair share in helping the economy out of recession and back into growth, not least because I am deeply concerned, as many Members know, about this Government’s policy of reducing the national debt by increasing private household debt, and about what that might mean for many of our constituents.
	I spoke at length on Second Reading last week about the impact of that policy on families throughout the country, and I do not propose to repeat the measures that I put forward, but, on the adequacy of the bank levy, the clause makes an omission that I hope the amendment will address. High-cost lenders are benefiting disproportionately from the impact of the Budget on our people, and from the fact that mainstream lenders are not lending due to banks paying out more in bonuses than they do to the people of this country, who need that money. Indeed, perhaps the omission calls for a
	new clause to deal with that issue and, therefore, to make sure that that money benefits our economy.
	The industry has certainly benefited greatly from this Government and from the events of the last year alone. Of the £216 billion of unsecured lending in this country, £8.5 billion comes from that market, which has increased by £1 billion in the past year, and £8.5 billion is the same amount of money that it would cost to repair all the schools in England—a cause dear to many Opposition Members. It is also the entire budget of the Department for International Development; we are talking about a substantial amount. The market is growing not least because of the lack of regulation—the lack of Government action to deal with the high-cost credit industry—and the amendment could deal with that omission.

Stella Creasy: My hon. Friend makes a good point about the importance of this Bill putting first the needs of this country and, therefore, about the importance that others attach to it. I hope that we can seek support from members in all parts of the House for the need to act on the high-cost credit market. There has certainly been support among Government Back Benchers; noticeably, however, Government Front Benchers have so far reacted with negativity to that support. I hope that they will change their minds, given the possibilities that we have through the Bill, the amendment and, indeed, the regulatory measures being considered to make progress on an issue that concerns many Members. Our concerns are about a number of products—I want to put on record what we are talking about—and the lack of action on such products in contrast to dealing with the bank levy and whether it is applied appropriately.
	First, there are payday loans. Many people will be familiar with the concept of a short-term loan, and given that almost half of households cannot make their pay cheques last to the end of the month, it is no surprise that almost one third of households are now considering such products. Interest rates on such loans include one from a company called Oakam, of about 443%; and many people will be familiar with Wonga, whose rates are more at the 4,000% level. We are also
	talking about the home credit industry and companies such as Provident. Many people will be familiar with Provident going from door to door in their communities lending money to people at interest rates of, say, 272%. That means that if someone borrows just £300 from the company—perhaps to buy a new sofa or TV, or to fix a washing machine or a boiler that has gone wrong over the winter—that will cost them £546.
	Were we to use this amendment and the opportunity of the bank levy to deal with some of these problems and with the actions of some of these companies, we would be encouraging the Government to look at the concept of adequacy and consider some of the issues in that market. First, there is the lack of competition in providing credit to those who are denied mainstream credit. That is embodied by the fact that there is no innovation in these products; they are very similar. There is therefore a great contrast with people who are able to borrow from mainstream creditors. Many people will be familiar with mainstream banks offering preferential rates and loyalty schemes to customers who they want to hold on to because they know that they have alternative sources of credit. We could apply the bank levy to the question of adequacy and ask whether these companies are acting in a way that is detrimental to consumers and whether the lack of competition is detrimental to consumers and to our economy. Many people have expressed concern that our banking industry is already overloaded, which requires more competition. I would argue that there needs to be more competition in lending to people who cannot access mainstream credit, and this is one way in which we could achieve that.
	A quarter of the customers who use high-cost-credit companies cannot borrow from other lenders. As a consequence, they do not build up the evidence of being good borrowers that would allow them to use mainstream sources of credit. These companies do not share information on their customers, making it incredibly difficult for customers to prove that they could use more mainstream sources of credit. The question of adequacy could also be applied to companies’ use of rollovers and stepping up of loans, which means that borrowers are stuck with using them. In particular, because they often lend only small amounts of money to begin with—

Barry Gardiner: I am very happy to do so, Mr Gray. We are talking about a bank levy, and amendment 9 refers to
	“the Government’s analysis behind the rate and threshold chosen for the bank levy”.
	It seems to me that if one is to perform an analysis of the rate and threshold chosen, one has to understand how these things came about and the historical context. More importantly, one has to understand the regulatory context and what went wrong in the regulatory system. Much of the debate has been about that regulatory structure. I am seeking to address subsection (2)(a) proposed in the amendment. That is exactly the import of my remarks.
	As the hedge funds brought their pressure to bear, they identified the problem of the companies’ overvaluation in the market. They saw that the structure of the bundled streams of security were not providing the security to the companies that the market believed they were providing. The hedge funds then short sold on those companies. That was an important regulatory failure. There was no uptake rule and no clear limit on the arbitrage window that was allowed for trading on such shares, so the short selling allowed the hedge funds to beat down the value of those financial institutions in such a way that there was a precipitation of the collapse of the credit that could flow through the financial institutions, which infected all the other companies in the stock exchange. That is how the situation became a global crisis.
	In addressing the analysis that the amendment asks the Government to engage in, I urge them to take seriously the regulatory failings at that time. [ Interruption. ] The Financial Secretary says from a sedentary position that those were the mistakes of the previous Government. What I am pointing out to him is that they were not simply mistakes made by the previous Government, but mistakes that were made on a global scale. The financial crisis started in the sub-prime market in the US, and that infected the global markets. The reason that it took hold in the UK, to the detriment of this country, was that we had placed an over-reliance on the financial markets and the financial sector as opposed to manufacturing and industry.

Barry Gardiner: My hon. Friend is absolutely right. To give the right hon. Member for Wokingham his due, he did differentiate his own position on the issue from
	that of his party’s Front Benchers. Both would have failed to support Northern Rock, the consequences of which would have been disastrous for savers, but the right hon. Gentleman would have gone further. He would have stopped any support for the wider banking system, including for Halifax, the Royal Bank of Scotland and Lloyds. There we see the consequences of policies that had their origin in “There’s no such thing as society.” Only if someone does not pay regard to society can they adopt such a hard-line position, because it ignores the consequences of failure and the effect on ordinary human beings—not just savers but, as he said, investors. The structural consequences of the failure would have been economically disastrous for this country.

John McDonnell: I would welcome the amendment because I think it is time to stand back and review the future role of levies. The amendment seeks to prise out the Government’s analysis regarding the rate and the threshold of the levy, but it also gives us the opportunity to debate the overall adequacy of a levy and its role in the economic situation that we face.
	I echo the right hon. Member for Wokingham (Mr Redwood) in saying that the world has moved on and the role of bank levies is different now. The first early-day motion on this matter, tabled by my hon. Friend the Member for Islington North (Jeremy Corbyn) and I eight years ago, in advance of the crisis, related specifically to the profligacy of the banks in their distribution of bonuses. We gained the support of 40 Members of the House. At that stage, the role of the proposed levy was fairly clear cut and straightforward: it was to act as a disincentive to the payment of such obscene bonuses, as others have described them.
	Then, economic crisis hit us. The first sign was Northern Rock. I remember being in the Chamber when we exposed the role of Granite in Northern Rock and the tax fiddles, avoidance and evasion—whatever we want to call it—that were taking place. We called for the Government to use public ownership to nationalise and stabilise the banking system, but we added to that a call for the maintenance of a levy system, because we wanted to prevent a recurrence of the bankers’ bonuses during a period of recession caused by their profligacy.
	As the right hon. Member for Wokingham said, the world has moved on, and we now have a bizarre situation. Yes, a levy on privately owned banks that are making profits and paying large bonuses is relevant, but introducing a levy on publicly owned banks is bizarre—it is a circular form of taxation—which is why the review proposed in the amendment is important. Surely if we own banks, we should end such bonuses by diktat and force reasonable lending using our management control. I hope that the review will examine the adequacy of future bank levy arrangements.
	I compliment a number of my hon. Friends who have spoken in this debate, none more passionately than my hon. Friend the Member for Wansbeck (Ian Lavery), who reflected the climate of anger in which this debate takes place. There is anger about how individuals have been treated by the banks, but also anger about the impact of the banks on the overall economy. The impact has also been felt by families in the loss of jobs and cuts in services. If we are to have a review of the bank levy, I
	would welcome a commitment to absolute openness and transparency about the nature of the banks’ current operations. Many people are bewildered by the banks’ lack of adherence to the exhortations of successive Governments on the role that they should play, particularly in lending and long-term investment.
	I welcome the proposed production of a report, but I would prefer it to be published earlier. The amendment proposes a deadline of “before 31 December 2011”, but I would want the report no later than the autumn, because I believe we need a tighter analysis and review regime for the banks.
	I am no longer sure that the Government know what the levy is meant to achieve; they are certainly not clear on the appropriate rate, or even to whom and what the levy should apply. The previous Chancellor’s levy was clearly a bonus tax: it was an attempt to influence the behaviour of the banks and to end the remuneration system that encouraged reckless behaviour and the taking of excessive risk. The objective was also to raise income, although that was not the stated primary aim. Bizarrely—this is why I admitted an error earlier—the levy failed to influence behaviour, because the bonuses continued, but at the same time, it was extremely successful at raising income. In fact, it was seven times more successful than was originally predicted. As I said, the original prediction was that it would to reap £500 million, but £3.5 billion was gained.
	The review is important because when the current Chancellor was asked what the role of the proposed levy is, he replied that it was a lump-sum tax, or simply an aimed-for sum. However, that sum has changed as the rate has metamorphosed over the past year. On at least six occasions, there have been changes in the rate calculated, and therefore in the estimated amount to be gained. Why is the levy set at the level the Government propose? They have given us no clear understanding of that tonight. All we know, from various media reports, is that the bankers have laughed all the way to their banks. The tax take has been described as “relatively insignificant”. A number of commentators, some of whom appeared before the Treasury Committee, described the levy as generous, and others have described it as an easy ride for the banks. If the levy were set purely to generate a lump-sum tax take, why at that level? Why not double, triple or quadruple that level? I fail to see what analysis of the estimate has been made. In fact, so far, the Government have published no independent analysis that would allow the House to understand the rationale for the estimated take.

John McDonnell: That is exactly my point. It might be that the levy is being set in relation to other banking reforms, particularly those on bonuses and remuneration, but not only have we seen the complete disregard of the Chancellor and Prime Minister’s exhortations, with bonuses continuing at a very high level, but we have seen, as
	another Member said, a diversion into other forms of remuneration and salary increases. That is almost an abuse of the system as set out in the Government’s proposals.
	If the debate is about the adequacy of the levy, and in view of the fact that in spite of the Government having set down a marker in the proposals, bonuses have continued and remuneration has increased, can the Government not support the amendment? If the review reported at least by December—I would prefer the autumn—we could consider increasing the levy to ensure adherence to the wider banking reform proposals the Government want implemented. It is clear from the evidence produced today that the banks need a continuing threat—a sword of Damocles—hanging over their heads, if we are to get any change in the bonuses and remuneration that are so offensive to all our constituents suffering in the recession.
	It might be that the levy was set so that the Merlin agreement could become fully operable and lending might start in earnest again. As my hon. Friend the Member for Nottingham East noted, however, so far all the indications are that the revival of lending has not taken place. The Government’s proposals therefore warrant a review at the earliest stage, because even now, while they are still being implemented, they are not working. The evidence for that is all around us. It is clear now—this is why the review is so important—that the levy has become almost irrelevant to the real issues of capitalisation and regulation.

Andrew Love: I agree with my hon. Friend about the review’s importance. On the one side, bankers are telling us that they are lending money and that money is available to lend; on the other side, we have small business organisations unified in saying not only that money is not available, but that the terms on which it would be made available are so onerous as to make it impossible for them to take out a loan. The review could resolve who is right and who is wrong.

John McDonnell: The review would certainly test the adequacy of the levy as an instrument for influencing banks’ behaviour, which I believe is its purpose. However, the problem is not just the lack of lending; it is the continuing profiteering in the mainstream banking system—let alone the shadow banking system that my hon. Friend the Member for Walthamstow (Stella Creasy) has been so assiduous in exposing. In the main Budget debate, I highlighted some of the interest charges being made. A report by Moneyfacts last August showed that the profit margins enjoyed by the banks on fixed-rate deals are the highest since 1988, and that the average interest rate on personal loans was 12.6%, which at 12.1% over the base rate is an all-time high. So far, the threat of the levy has done absolutely nothing to change banks’ behaviour in any aspect, whether remuneration, bonuses or lending. We are in danger of allowing the banks not merely to return to business as normal, but to get even worse. Even those in public ownership out of public control. I find that extraordinary.
	The review must take place in the context of other attempts, such as the Basel discussions, to restrain or control banks’ behaviour. Basel II seems to let the banks off the hook on a range of issues, from remuneration
	to capital ratios. The levy is meant to come in the context of the reforms the Government are engaging in nationally and internationally, but the
	Financial Times
	reported today that discussions about global standards on bank lending risks are not moving towards an agreement, so now we are not even moving forward in capital ratio discussions.
	We need to consider the levy in the context of the banks’ role overall and the anger in our wider communities. Many believe—rightly—that the banks played the key role in creating the recession, and now, if we are not careful, by not lending or engaging in economic growth, they will play a role if not in tipping the economy into a double-dip recession, at least in leaving the economy to scrape along the bottom of economic activity. I have referred before to the words of Graham Turner, from the Left Economics Advisory Panel. He works in the City and is an expert on what happened in Japan. We face the prospect of a long, low-level, depressed, deflationary spiral if we do not use the levy to stimulate the banks into playing a responsible role within our economy.
	We will come out of recession only through an astute mix of fiscal and monetary policy. In the 1930s—this is the whole point about Keynes—it was about not just deficit funding and quantitative easing, but more importantly banking reform. Banking reform is one element of the strategy that any Government must adopt to take us out of recession, and the banking levy is one of the few tools and weapons at our disposal that can force through banking reform. So far, the threat of the banking levy has failed to engage even those banks that are in public ownership in a proper discussion about banking reform and the role that they will have to play in tackling the recession and encouraging economic activity.
	I urge the Government and all parties to accept the amendment. All it does is seek a review, so that we can come back to this place—the amendment says in December; I would welcome doing it earlier—having reviewed the banking levy’s effectiveness. I do not understand why that is difficult for the Government to accept. At that stage, if we find that the banks are continuing to ignore the Government’s exhortations and to ignore the levy as a means of encouraging them to engage in constructive activity in our economy, we can adjust the policy. We can then use it as a proper lever to encourage new banking practices, increase transparency and accountability in the banking sector and get the regulation for which everybody across all parties is now clamouring, but which in the past has been ignored.
	I support the amendment because it could be the start of a valuable process of engaging realistically with banking regulation in this country. I also support it because if the banking levy proves to be ineffective and we do not review it and make it effective, if the bonuses are let rip again next Christmas but lending is not happening and the bankers and the banks are not playing their full role in tackling our recession, the anger among our constituents will be immense, especially if they are on the dole or are facing cuts, or if their communities are facing severe deprivation. That anger will also fall upon our heads for failing to act by simply having a review to ensure that we have the right mechanism to tackle the banks and the recession.

Stephen Pound: Does my hon. Friend agree that we seem to have had an example today of the Sage of Twickenham being seduced by the subtle perfumed blandishments of the banking industry? Might this not be time for us to say, “We’ve had enough of ‘Double Your Money’ and ‘Who Wants to Be a Millionaire?’ Let’s go for ‘Call My Bluff’”?

Hugh Bayley: I wanted to follow up the intervention of my hon. Friend the Member for Blaydon (Mr Anderson). It was not only the OECD that praised the London summit, which got the leaders of the western world to work together through fiscal stimulus to avoid recession. I remember going to the IMF in spring 2009 and what it described as “the Brown plan” was, it said, the only thing that stood between a global financial meltdown and getting the world economy back on a level footing. Does my hon. Friend share my concern and dismay at the Prime Minister saying that he would not support the former Prime Minister if he decided to run for the job of managing director of the World Bank? Surely the best way to test the Prime Minister’s thesis about whether the former Prime Minister’s leadership was good or not is to allow him to run and see whether other countries support his candidature.

Kevan Jones: If the hon. Gentleman believes that it is possible to obtain all the answers that he requires by means of parliamentary questions, that demonstrates his naivety. Having been in the House for nearly 10 years and having, as a Minister, spent many hours trying to avoid answering parliamentary questions, I can only say “Good luck to him”.
	Let me quote from the amendment—

Kevan Jones: Oh! With pleasure.

Kevan Jones: I am, but that is part of the scrutiny process, and so is this. If the hon. Gentleman is so interested in the banking levy and the effects of the Bill on his constituents, why does he not speak? At one point he was alone on the Liberal Democrat Benches. The Government Benches have been fairly deserted this evening: the poop deck of the Mary Celeste may have had more life in it. Members who support the proposal in the Bill should at least turn up to argue in favour of it. No doubt we will be receiving “Focus” leaflets from the Liberal Democrats—although after Thursday they may be called something different—describing how tough they have been in regulating the banking system, but it is clear that they have not.
	The hon. Gentleman has until late tonight, and tomorrow, in which to contribute to the debate so that he can reproduce his contribution in his “Focus” leaflets ad nauseam, which I know the Liberal Democrats love doing. People will be able to learn about how he stood up for them against the bankers rather than just listening to the hollow words and rhetoric of the Prime Minister and the Deputy Prime Minister in the run-up to the general election. The beauty about being in government is that politicians can actually do things. I know it has come as a big shock to many Liberal Democrats that they are in a position of responsibility whereby they can actually affect the lives of ordinary people. [Interruption.] Yes, responsibility without influence, as my hon. Friend the Member for Gateshead (Ian Mearns) says from a sedentary position. As the Liberal Democrats are in government, they can follow through and make sure that the Bill deals with the people who were responsible for getting us into this mess three years ago. They also have an opportunity to tackle the excessive profits. I do not know what the average salary is in Bradford, but I am sure that £1 million is a lot of money to the people there. I know that in 1914, prior to the first world war, Bradford won the competition for being the place where the most Silver Ghosts were sold, because it was a rich mill town back then; I learned that from the predecessor of the hon. Member for Bradford East when I was working for him in a by-election many years ago. I doubt whether many Rolls-Royces are sold in Bradford nowadays, however, and the hon. Gentleman’s constituents can only dream of some of the bonuses he is supporting this afternoon.

David Ward: The amount levied by the previous Government was stated very clearly as being a one-off that could not be repeated. Everybody knows that, so why cannot the hon. Gentleman admit it?

Kevan Jones: My hon. Friend makes a good point. That small seedcorn funding made all the difference for small companies as they established themselves and grew. The problem we have in the north-east—I am not sure whether things are the same in my hon. Friend’s region—is the lack of confidence in the regional economy for the reasons mentioned by my hon. Friend the Member for Gateshead. The uncertainty about what will happen in the next few months as the public sector job cuts work their way through the economy means that there is no appetite to invest in small businesses. A few weeks ago, I was talking to someone from a small building company who relied as part of his turnover on school building contracts with the local council, which had suddenly been stopped, so the money is not available and people will have to be laid off. We have not yet seen the effects of such decisions.
	If we add to that the fact that banks are not lending and are going to carry on in their own way, those involved with small businesses end up wondering why decent hard-working people like them who, in many cases, have built up businesses over many years are suddenly through no fault of their own having either to lay people off or to fold the businesses completely. These are family businesses which have been going for many years, andpeople see individuals getting bonuses that involve amounts of money of which they can only dream and which are equivalent to the turnover for their companies over two or three years, never mind one year.

Kevan Jones: The hon. Gentleman makes a good point. That is the acid test. The Government must explain why they set the figure. I am happy to listen to the evidence—even the evidence that the hon. Member for Bradford East could come up with. I do not think we are anywhere near the tipping point at which the entire banking system crashes, especially as Barclays and others are paying large bonuses. If we had a review and analysis, we could see how the figure was arrived at. Unfortunately, we are in the dark about that.
	A further point is the progress that the Chancellor has made on tax activities. If we are to remain competitive internationally, is there an international tipping point across Europe in respect of bank levies and caps on bonuses?
	The hon. Member for Bradford East seems to be dreaming if he thinks he will ever find himself in the Front-Bench team of the Liberal party or the coalition, but it is nice to see him sitting on the Government Front Bench.
	Is work being done internationally to look at what other countries are doing? We need to study that in detail to see whether £3.5 billion would be too much. We need to achieve agreement across Europe.
	The subject of Project Merlin has been raised. What leverage does the Treasury have over lending to SMEs? To what extent will the cost of the levy be passed on to customers of the commercial or private sector—in other words, to all of us who use banks? Will it become more difficult for SMEs to borrow money if bank charges are passed on? To explain Project Merlin, much
	more needs to be put forward. A review would enable us to look in detail not just at the bank levy, because we must remember that the amendment also relates to other areas of banking tax. That would also lead to the public having a lot more confidence in politicians actually following through on their rhetoric about being tough on bankers.
	In conclusion, this is a missed opportunity. If we followed through on the rhetoric and showed that we were not only fair but tough on the banks, we would be able to stand in front of our constituents and say that we had stood up on their behalf to those responsible for the crisis that hit this country, which our constituents are all paying for today through the austerity affecting them, and that the mess we got into as a result of the crisis a few years ago will not be repeated. If they do not do that, the Government will have to review and change, because otherwise the electorate will do it for them. The Government will not be able to stand up and say that somehow they have been tough, that they have followed through on the rhetoric and, more importantly, that they have made sure that such a crisis will never happen again.

David Lammy: It is a great pleasure to follow my hon. Friend the Member for North Durham (Mr Jones), whose eye for forensic detail and lucidity in these matters is second to none. He could not be described as brief, and on this occasion I intend to be a bit briefer. The amendment seeks a review of this proposal because, at its heart, this is about equity and fairness. You, Dr McCrea, understand better than anyone what fairness and equity mean.
	There has been much talk about small business men. A small business man came to see me a month ago about the lack of finance from Barclays bank. It is true to say that even though we all have stories of small businesses that are unable to get loans, many constituents come and ask Members specifically not to contact their banks, because they are scared, frankly, that they will be cut loose and that the intervention of a Member of Parliament could make things worse. The fact that across the Chamber no party is suggesting that we have got back to a situation in which there is access to loans indicates that industry and small businesses in this country are in a very serious way.
	That brings me to the other deceit, or conceit, that lies at the heart of what has been suggested. Much has been made of the manufacturing sector. Yes, it is hugely important, but it employs 4 million people or thereabouts, whereas 23 million are employed by the service sector, which is a depressed sector. That is perhaps why, alongside the public sector cuts we are now seeing, unemployment in Tottenham is the highest in London. The levy, set at the right amount and consistently reviewed, could have done something to ameliorate that.
	It is about fairness and equity, and it is also about what the Government’s story on growth really is. Some of what we are hearing on how they see the levy and the box into which they want to put it, with the constraints of £2.5 billion only, can only mitigate the growth that we want to see in our constituencies.
	The single mums who came to see me a few weeks ago because the after-school activity club is being cut for their young children and they are wondering how they are going to get back from work by half-past 3 to pick them up need to feel that bankers, too, are making a contribution. The elderly suffering from Alzheimer’s in one of my local residential homes, against a backdrop of three being closed because the local authority is being squeezed, need to feel and want to believe, because of the age they have reached and the contribution they have made to this country, having paid into the system, that the banking sector is also making a contribution that is fair. The many public sector workers who received their payslip for the last time just a few days ago also want to believe that bankers are making their contribution.
	They cannot understand why, despite the fact that growth in our economy is so sluggish, at barely 2% over the most recent period, City workers are taking home an increase of 7% on average. Why have 231 workers at Barclays bank managed to receive bonuses of £554 million between them? How is that possible, when the dividend for those who have shares in that bank was just over £600 million? That is a bonus culture that has not been checked, that has not been sorted out, and that feels brutally unfair.
	When I was canvassing in Slough at the most recent general election, a 90-year-old said to me, “Love, you know what it is? The poorer you are, the more you give in this country.” That is how it feels at this point, when we have to come back to a subject on which really we ought to agree. We know that the banking sector led to this depressed economy, so why should it be let off the hook at this time?
	When my hon. Friend the Member for North Durham asked, “Where did we get this £20 billion from?”, I asked the Minister to begin his contribution with the answer. Where did that £20 billion allowance come from? It is a staggering amount of money to slot in at the last minute so that the figure drops beneath the £3.9 billion mark which the industry itself originally predicted. Where did that money come from, and how did we secure the millions in tax relief for that sector? We owe a bigger contribution from the banking sector to the young people of this country, one in five of whom is currently unemployed.
	This Government have led us to a situation in which the new arrangements for funding higher education are between the student solely and the university. They have taken the state entirely out of the picture, cutting teaching funding by 80% and abandoning arts and the humanities and any contribution to them. Effectively, with a proper banking levy they could have said that the state could stay involved. Industry, the other sector that benefits, could have made a contribution, too, but the banking sector is certainly somewhere where we could have started. The Government, however, turned their face against that, saying, “No, we’ll land the debt on our young people and let the very people who have led to their unemployment off the hook.”
	I want to understand why the Minister has made that decision, and how we will get back to growth, given that young people are to be dealt with in that way.

Andrew Love: I congratulate my next-door neighbour and right hon. Friend the Member for Tottenham (Mr Lammy) on a very competent speech.
	It will not come as a surprise to those in the Chamber that I support the amendment. I support it primarily because there is so much public interest in and concern
	about bankers’ bonuses and the contribution being made by bankers when we are all supposed to be pulling our weight. I also support it for the reason given by the shadow Minister: a peculiarity of our system is that we cannot amend upwards any proposal in the Finance Bill, and the amendment offers an alternative way to look critically at the levy by proposing a review, which is not unreasonable. By December, we should have some idea of how it is working.
	The most important feature of the amendment, as discussed earlier, is that is asks for a report to be published that can be debated by this House. Because of the importance of the issues involved, that is critical. The report will include an account of how the rate and the threshold were decided. As we have watched the measure’s development over the past few months, we have started to have a sneaking suspicion that Ministers decided what amount of tax should be paid by the banks and then worked back to what the threshold and the rate should be. I will come back to that point later.
	Much has been said by Opposition Members about the measure’s adequacy. It is right to say that it will not raise as much as the bank bonus tax did and it is felt widely, within the House and outside, that the levy does not reflect the contribution that bankers ought to make. That relates to new subsection (2)(c) in the amendment. I will come back to bankers’ bonuses, because they have an important implication for the contribution that bankers should make.
	In what the Government propose, we are being asked to agree to a levy on UK banks and building societies and on the UK operations of foreign banks. It is estimated that it will affect between 30 and 40 institutions, covering all the largest financial services institutions in the City of London and throughout the country. That proposal seems reasonable, but it is important that it is reviewed to see whether it is appropriate.
	The tax will be levied on what the Chancellor termed the wholesale funding of banks, which is the liabilities and equity minus a number of items that are considered safe, such as tier 1 capital and insured retail deposits. I think that we are being asked to agree that that will incentivise the use of prudent balance sheets, rather than risky balance sheets. Of course, the wholesale funding that the Chancellor talked about was a major cause of the difficulties in the credit crunch. We all remember the collateralised debt obligations and the exotic funding regimes, although I do not think that any of the major institutions are into any of that now. The proposal, which mirrors the proposal that was discussed internationally, is intended to incentivise our banks to hold safer liabilities than they held before.
	Many Opposition Members have commented on the threshold of the tax, which has been set at £20 billion. I hope that the Minister will respond to the concern that that figure is far too high. The rate has been a moveable feast, and there have been many different rates and proposals. As was mentioned earlier, the Chancellor got up one morning—it just happened to be the day of Treasury questions—and announced another change. Changes have also been announced presumably because of corporation tax, and there has been concern that the rate may have been raised as a result of the failures of Project Merlin, which I will talk about later. We have had many different threshold rates, and I ask the Minister to clarify how we reached all those rates, where we are
	now and how much money the levy will raise. It is suggested that it will raise between £2.5 billion and £2.8 billion, which, as other Opposition Members have said, seems a very low figure in the present situation. I hope that he will respond to that concern.
	What is the levy meant to achieve? Supposedly, it deals with a number of matters. First, numerous speakers have mentioned the implicit public subsidy that we provide to banks. The Bank of England has done some work and suggests that there is a £100 billion subsidy; others have suggested lower figures, but there is consensus that the figure is very substantial. If the bank levy will raise only one twentieth or one fortieth of that sum, that puts the matter in context.
	To pick up on a point that the right hon. Member for Wokingham (Mr Redwood) made, the bank subsidies make life for new entrants to the marketplace—they are called challenger banks—very much more difficult, as they do not have any of those subsidies, reflecting the idea of banks being too important to fail. That notion should be the crux of our discussion about the financial services sector, because it raises the question of moral hazard: will banks that are too important to fail take riskier decisions, as happened in the lead-up to the credit crunch? I would like the Minister to explain how those issues relate to the levy. We understand that it will provide only part of the contribution that has to be made, but what contribution will that be?
	I mentioned banks being incentivised to hold less risky liabilities. The reason for that is clear: if things go wrong, it is not just the financial services sector that is affected. Unlike other industries, in which problems affect other companies in the same industry, if the financial services sector hits difficulties, the whole economy is hit, as we found out to our great cost in 2007. It is critical that we reduce the possibility of that contagion happening in future.
	We must deal with a number of issues peculiar to our financial services sector. Many believe that too much is concentrated in four or five very large banks and that as a result there is not sufficient competition. I will not go into the details of the Banking Commission’s report or the most recent Treasury Committee report, but those who have read them will know that both have strongly suggested that consumers do not have a great deal of choice in our banking system, that the banks are too concentrated and that it is very difficult for new banking companies to come into being. There is not sufficient competition and, by common consent, the cost is that banks make excessive profits. The levy should tax those profits. I would like the Minister to say whether he believes it will do that sufficiently.
	To return to a point that I made a few moments ago, in the light of the subsidy given to the banks—£50 billion is one suggestion, £60 billion is another and the Bank of England says it is £100 billion—a levy of £2.5 billion, which is between a twentieth and a fortieth of that subsidy, does not seem to address the problem that we face. Why does the Minister believe that the measure answers the concern about the financial services sector?
	I could be more generous and suggest that the Government are moving in the right direction. After all, all the changes in the rate of the banking levy have been increases—from 0.07%, to 0.075%, and for longer held
	assets, from 0.04% to 0.05%. I think I got those right, but I would be unsurprised if someone stood up and said, “You’re wrong. It’s changed,” or if I woke up tomorrow to find that the Chancellor had re-announced the rate. Those changes have raised the take from the levy by £200 million or £300 billion, so that £2.5 billion will be raised in the first year. However, as I said at the start of my speech, given how the £20 billion threshold was constructed and the rate changes, we cannot escape the conclusion that the Government have set the overall amount that they wish to take and then gone back to work out the threshold and the rate. I should like the Minister to explain why that is not the case.
	Of course, critically, at £2.5 billion or £2.8 billion, the levy does not raise as much as the bank bonus tax, so the suggestion—I put it no stronger than that—is that the banks are getting off lightly. The corporation tax reduction—corporation tax seems to have been constructed because the banks do not invest a great deal but have high turnover—and other changes could have been ideally designed for the banks. There is therefore a suspicion that banks are doing really rather well out of this year’s Budget. If that is not so, I should like the Minister to tell us why not.
	There are many good reasons why the Minister should have been more draconian in introducing the levy. After all, as has been said by many hon. Members, when the coalition parties were in opposition, they told us that negotiations between the Government and the banking industry on proposals such as Project Merlin would produce certain results; on bonuses, however, the Government got absolutely nowhere. Statements were made about constructive negotiations, so it was embarrassing to find bankers telling us that there was no change.
	Of course, still more critically, we were told that small businesses are the lifeblood of our economy—that mainly small businesses in the private sector would make a reality of the Government’s so-called strategy of getting the private sector to take up the slack created in the public sector. If they are to achieve that, they need to grow.

Roberta Blackman-Woods: May I draw my hon. Friend back to the use of the bank bonus tax to promote growth? We heard last week that the construction industry was struggling to come out of the recession. Of course, applying the bonus tax and giving it to the construction to, for example, build affordable homes, which are very much needed in my constituency and many others, would have helped to stimulate the economy.

Andrew Love: I thank my hon. Friend for that intervention. He is correct. When that legislation was passed, we argued that many parts of London had suffered tremendously from the credit crunch and were as deserving as—if not more deserving than—other parts of the country. However, that argument was not listened to. Perhaps the policy would be a little more successful if the Government had included London, along with all the other parts of the country.
	The policy has clearly not been a success. The Government’s growth strategy is not producing growth. I would therefore like to suggest an alternative growth strategy, the merit of which is that it was beginning to bear fruit at the time of the general election.
	I will pick out just a few areas at which the Government need to look carefully, while searching their conscience and trying to construct a positive growth strategy and address these concerns. First, youth unemployment is just about topping 1 million. One in five of our young people aged 16 to 24 are unemployed, and a focus on getting young people back into work, as we were trying to do before the general election, would pay dividends. We shall lose a whole generation if we do not address the youth unemployment problem, and that should be a priority for the Government.

Lindsay Hoyle: That is not a point of order. It is up to the Minister to decide how he wishes to reply to the debate.

Lindsay Hoyle: Order. I think it would be of interest to the House to hear from the hon. Member for Nottingham East (Chris Leslie), and I am sure that he will not take too long.

Kerry McCarthy: The backdrop to today’s debate is an economy that is flat-lining, as the Chief Secretary to the Treasury admitted last week. Since the Chancellor’s spending review, we have had no economic growth, and it is ordinary people who are hardest hit by that stagnation, with 2.5 million people out of work, including nearly 1 million young people—one in five 16 to 24-year-olds. An increasing number of people have been jobless for more than a year—nearly 850,000 and rising. This year, as the Government’s cuts start to bite, hundreds of
	thousands more people could lose their jobs. I believe that that is what the Minister of State at the Cabinet Office called an
	“immediate national crisis in the form of less growth and jobs than we need.”
	Apparently, it is what the Chancellor describes as “good news” and a sign that the economy is on the right track. Families are feeling the effects of the crisis in their pockets. Prices are still rising by more than 5% on the retail prices index, while earnings are growing at just 2% a year.
	Rising fuel prices are a big part of this squeeze. According to the Office for National Statistics, fuel prices are currently one of the most significant contributors to consumer price inflation. According to this week’s figures from the Department for Energy and Climate Change, the average UK pump price is now £1.36 for a litre of petrol and £1.42 for a litre of diesel. I am sure that many Members will be aware that at their local petrol pumps prices are even higher. That means that petrol is more than 3p a litre more expensive than it was last month, or 15p more than this time last year, and that diesel is 3p more expensive than last month, or nearly 20p more than last year. Unfortunately, the 1p saving we got from the Chancellor’s cut in fuel duty lasted barely a week before price rises at the pumps wiped it out.

Lindsay Hoyle: I must admit that, if there was noise interference, I did not know where it was coming from and could not hear it in front of the Chair. I am sure that Members will be quieter in future.

Kerry McCarthy: I thank my hon. Friend the Member for North Durham (Mr Jones) for that, because it certainly seemed quite noisy from where I was standing.
	As I was saying, as real incomes fall, spending on basic items such as food, energy and fuel make up an increasing proportion of the average family’s weekly spend, as the Office for National Statistics acknowledged in March when it changed the make-up of its retail prices index basket. That means that families are increasingly vulnerable when prices rise quickly.
	The Opposition accept that no Government can control the price of oil, which the global markets set, and that the situation in the middle east is affecting people in countries throughout the world, to which the UK is of course no exception, but the Government have control over fuel taxation, and that has a significant effect on pump prices. When so many people are out of work and real wages are falling, the Chancellor has a responsibility to do all he can to help business and to promote economic growth and jobs; and when ordinary working people are struggling to make ends meet, he has a responsibility to do everything possible to help them get on.
	That is why we tabled amendment 7. It is important that Parliament has the opportunity to scrutinise the Government’s policies on fuel taxation and their total effect on fuel prices at the pump, because the Chancellor’s cut in fuel duty, as set out in clause 19, is not all that it seems. In January the Government decided to increase VAT on fuel from 17.5% to 20%, even though the Prime Minister told voters just before the election that he had “no plans” to increase VAT. Without that VAT rise, petrol would be almost 3p cheaper now, swamping the 1p cut that the Bill brings in.
	The Federation of Small Businesses said that the UK’s small and medium-sized enterprises would be “severely affected” by that hike in fuel tax. A survey of its members in January pointed to the increase as the single biggest threat to their business—something that will resonate with Government Members, who I am sure have been lobbied by the FSB on that point. Some 89% of businesses that responded thought that the Government’s measures would add £2,000 to their costs over six months. A spokesperson for the FSB said in response to the January rise in fuel tax:
	“The Government have said it is putting its faith in the private sector to put the economy on a firm footing, yet 36% said they will have to reduce investment in new products and services and 78% said their profitability will be reduced—hardly conducive to growth.”
	Many small business people in my constituency are struggling to stay afloat, particularly in the face of cash-flow difficulties. The VAT increase at the beginning
	of this year was expected to put severe strain on their cash flow, so the Chancellor’s 1p reduction in fuel duty has to be seen in that context.
	Some people will be able to cut down on their use of fuel or even stop using petrol all together. Some people are switching to cycling or to public transport, and for those who are able to do so that is a good thing. As an MP for Bristol, which saw investment from the previous Labour Government so that it could become the UK’s first cycling city, I welcome people taking up cycling.

Lindsay Hoyle: Order. We must keep questions to the subject of the amendment that we are dealing with.

Lindsay Hoyle: Order. As Mr Hosie knows, that is not a point of order.

Ian Mearns: What happened over a number of years—I am afraid that our Government were not immune from this—was that, rather than planning roads to encourage economic growth and development, we planned them to accommodate congestion. That was not always the best thing to do from an economic perspective. Down that road lies ruin, if you will pardon the pun.
	The Federation of Small Businesses has asked for a fuel stabiliser. I am not saying that I necessarily agree with the federation, but stability in fuel prices is important. The Chief Secretary said of a fuel stabiliser:
	“It’s a complicated idea and it’s difficult to see… how we achieve it, but it’s something that we are looking at very carefully to see if we can reduce the burden of fuel duty”.
	I wonder whether the concept could not be more straightforward. When oil prices increased, the stabiliser—or a stabilising impact effect—would allow the Government to reduce duty to a lower limit; when oil prices fell, the Government would be able to raise duty to a higher limit.
	Critics cite the difficulty of knowing whether the fluctuations in the price of oil are temporary or likely to persist beyond the near term, saying that it would be difficult for a fuel duty stabiliser to set fuel duties effectively. To counter the volatility in the price of oil, a fuel duty stabiliser or a stabilising measure would need to be based on an official forecast of the future price of oil, and then adjusted regularly according to the actual oil prices. It will be difficult, given the volatility in how the international oil markets are working at the moment,
	but we need to try to find some measure to help our small and medium-sized enterprises through this difficult process at this difficult time; otherwise, we are in real danger of seeing fuel become a major blockage to economic growth, not only in particular regions, but across the whole nation.
	Would this be bad for the public finances? The Chief Secretary said that we cannot “sacrifice income willy-nilly”. Critics argue that a stabiliser or a stabilising effect would be too expensive to implement during a time of austerity, but that criticism fails to take into account the wider implications of high fuel prices on the UK economy. If set correctly, the measure could be fiscally neutral for the public finances and help to provide much-needed economic stability for the UK economy. My main point in asking for some sort of analysis in a review is that the measure is needed so much more in the regions of England, particularly regions such as the north-east, but the south-west as well.

Mike Gapes: The amendment states that the Chancellor should
	“publish, within 3 months… an assessment of the impact of taxation on fuel prices.”
	I will address my remarks to the scope of such an assessment. It is important not to focus solely on the narrow issues surrounding VAT, although they are important, or on the global increase in fuel prices, which is one of the factors causing the revolutions in north Africa and elsewhere in the world as people suffer from rising food prices as a result of rising fuel prices.
	There is something very specific about how we in this country choose to tax fuel. Compared with other European Union countries, we choose to have very high taxes on fuel. One consequence is the problems from which our road hauliers have suffered in comparison with some of their competitors in European countries that have road pricing.
	It is interesting to note that in the 2010 general election, the Liberal Democrats proposed to move towards
	“a rural fuel discount scheme which would allow a reduced rate of fuel duty to be paid in remote rural areas, as is allowed under EU law”,
	as well as to prepare for a system of road pricing to be introduced “in a second parliament”. That was the Liberal Democrat position. The Conservatives, of course, had a completely different view, promising for a “fair fuel stabiliser”, presumably designed to help people in the rural communities.
	I represent an urban area. My constituents suffer high fuel prices in London and, unlike some people in rural areas, they do not have the advantage of having to pay only 11.14p duty on a litre of so-called red diesel, instead of 57.95p duty on a litre of low-sulphur diesel. We know that there is abuse of the red diesel system by certain people who, when driving on main roads, use diesel that should be used only for off-road activities. That opportunity is not open to my constituents. People living in Ilford and elsewhere in Greater London do not have access to red diesel that they can abuse in order to avoid paying tax. However, people who are represented by the Liberal Democrats, who are in favour of giving priority to remote rural areas but not to those who us who live in urban areas, or by Conservative Members who are happy not to enforce adequately the provisions against abuse of the red diesel system, are not concerned
	about that. I want the review to examine the abuse of the red diesel system. I believe that a lot of money that should be going to the Exchequer is not doing so and that there is discrimination against people who live in urban areas and have no access to red diesel for their motoring purposes.

Kevan Jones: I support the amendment, which asks for a review. In the previous debate, we asked for a review of the implications of the bank levy. Similarly, the amendment calls for an assessment of the impact of taxation on fuel prices. It would be disingenuous to suggest that all Governments have perfect relationships when it comes to dealing with fuel duty. Clearly, the previous Government had problems with the cost of fuel and difficulties over taxation, but my hon. Friend the Member for York Central (Hugh Bayley) exploded one of the myths about the tax-take from fuel duty. Under the Conservative Government from 1990 to 1997 the tax-take on unleaded petrol rose by 16%, and under the Labour Government between 1997 and 2010 the tax-take fell from 75% to 65%.
	The Government delayed the planned fuel duty rise, as Labour Governments did previously, as oil prices rose. Was that the right decision? Yes. At a time when many hard working families are affected not only by higher inflation and increased taxation, but by wages being driven down and in some cases by family members
	facing unemployment, the Chancellor’s VAT increase puts about £1.30 on the cost of filling up a 50 litre tank of petrol.

Kevan Jones: I am becoming concerned. The hon. Lady’s blood pressure does not seem stable tonight. She seems to be turning red and getting rather excited in tonight’s debate, which I am not sure is good for her health. Why did she argue for and push through an increase in VAT when she and her Prime Minister stood on a manifesto saying that they would not put VAT up? That is not being honest with the British people. What she has to explain to hard-working families in my constituency, North Durham, and in Putney is why she reneged on that promise.
	There has been much talk in recent weeks about trust in politicians, and a lot of nonsense talked by the yes to AV campaign about whether MPs are hard working and trustworthy. When the Prime Minister and the hon. Lady say clearly that they will not increase VAT, and then that is the first thing she does, I understand why my constituents and hers are rather cynical about certain promises.
	In the Budget the Chancellor used the gimmick of cutting the price of petrol by 1p. We will shortly debate how he will pay for it. It has had disastrous consequences for the economies of parts of Scotland and the north-east England. He also increased VAT by 3p. He took it off with one hand and put in on with the other. Paying for that will have consequences for oil exploration in the North sea not only in the next year or so, but for a generation.

Justine Greening: The hon. Gentleman is obviously one of the Labour party’s structural deficit refuseniks. He simply refuses to accept that the deficit exists. I am sure that he would also refuse to accept that his party left unemployment 400,000 people higher by the end of its term in office. We understand the problems that our economy faces and the Budget was all about tackling them.
	I will turn to the substance of the amendment. For motorists to realise the benefits of the cut in fuel duty, retailers need to pass it on at the forecourt. If the cut in fuel duty had been fully passed on to average pump prices, including VAT, they would have been 1.2p per litre lower. The amendment seeks a published assessment of the degree to which the cut fed through to pump prices. As I said, we have already published a tax information and impact note that sets out our analysis of the impact of the cut. Following the Budget, the website petrolprices.com, which gives independent average daily prices and which the previous Government used to track prices, showed that average pump prices fell by approximately 0.8p per litre between 23 and 28 March. It can be clearly seen that the reduction in fuel duty largely fed through to prices at the pump. Therefore, prices are lower due to our actions and motorists are benefiting from the cut in duty. Let us not forget that average pump prices are approximately 6p per litre lower as a result of the cut in duty and our scrapping of the previous Government’s planned escalator, which they would have gone ahead with.

Kerry McCarthy: We have had an interesting debate over the past couple of hours. It is notable that although we have had some significant and thoughtful contributions from my hon. Friends, not a single member of the Conservative party, apart from the Minister, or a single Liberal Democrat has felt the need to speak up for their constituents and talk about rising fuel prices. I am sure their constituents have lobbied them about it, but their silence in the Chamber today speaks volumes.
	My hon. Friends the Members for Wirral South (Alison McGovern), for Gateshead (Ian Mearns), for Ilford South (Mike Gapes), for York Central (Hugh Bayley) and for North Durham (Mr Jones) have all highlighted the impact of the rise in fuel prices and of the Government’s decision—and it was the Government’s choice—to raise VAT from 17.5% to 20%. They described the impact on families’ living standards, on businesses in their constituencies, on the haulage industry and across the board.
	The point is that the Minister’s view of the impact is short-sighted. She cited the impact of the measures in
	the Budget from 23 March to 28 March, which must be the smallest, most selective economic data ever cited in the Chamber. It would be interesting to know what happened after 28 March, to which she did not refer. She also tried to lead us down the garden path by talking once more about the fuel duty escalator, but she knows full well that the Opposition called for the Government to reconsider that in the Budget and welcomed the fact that they did so.
	The debate is on the VAT increase, which the Government chose to introduce. We are asking simply that they publish an assessment, within three months of the Bill becoming law, of the impact of taxation on fuel prices. I do not think that that is too much to ask. I was surprised the hear the Minister say that we would not press the amendment to a Division, because I can inform you, Mr Hoyle, that we do indeed intend to do so. With that, I rest my case.

Malcolm Bruce: The purpose of this group of amendments is to persuade the Government to engage with the oil and gas industry to ensure that no major new investment opportunities are lost. I will explain the purpose of the main amendments, and I very much hope that Ministers will respond in a constructive way, because these are intended to be constructive proposals.
	The Government are on record as saying that they understand the need for stability in the fiscal regime, and the Chancellor has described this as a Budget for growth. It is worth saying, however, that in contrast to the cautious way in which the Government have applied new taxes to banks, which have squandered our resources to the extent that many of them had to be nationalised, it is quite harsh to apply a marginal rate of tax of 82% to our single biggest industry. It is an industry that invests in real infrastructure and real engineering, and it takes risks in regard to weather, geology, exchange rates and cost unpredictability, as well as taxation.
	I accept that the current spot price of Brent crude, at $125 a barrel, allows for unforeseen profits, at least for some fields. However, that does not apply to gas fields or to fields with large quantities of associated gas and, as Ministers will know, that is not the price that many operators actually realise, as they often contract their production at an average well below the spot peak.
	I say in passing that the link between the oil tax changes and the fair fuel stabiliser are tenuous. Many of the companies operating in the North sea have no retail division, and there is no direct connection between their returns and the pump price. Also, the Government are themselves the recipient of a windfall. According to the Library brief and, I think, the Red Book, North sea profits are running at between £1.5 billion and £1.9 billion per annum over the next four years. That is additional revenue that was not anticipated in the pre-Budget statement in November. The Government have also received a VAT windfall on pump prices, averaging about 6p a litre. However, my point is not that there is no case for additional contributions from North sea operators and field shareholders. I do not take issue with the Government about that. My point is that this should be done after proper consultation and taking due account of the complex character of the mature North sea industry.
	I have monitored the industry for 40 years. Indeed, 40 years ago this September, I started work as research and information officer for the North East Scotland Development Authority. Towards the end of that year, 1971, BP announced the successful commercial test of a well, which turned out to be the discovery of the Forties field. However, it is interesting to note that, believing that it had reached the end of its useful life, BP sold the Forties field to Apache in 2003. Since its acquisition of the field, Apache has greatly enhanced recovery from Forties and sees long-term potential for its development. It is worth noting that Apache has been one of the most vigorous critics of the Government’s policies, and that it questions whether their investment will be fully committed or realised.

Malcolm Bruce: Before I do, I want to point out that today I received the Oil and Gas UK index of confidence in the industry, which is to be published tomorrow. It is not surprising to note the very sharp fall in confidence within the industry that the index reveals about the first quarter since the Budget. For example, exploration and production companies’ confidence has fallen from an index level of 71 in the fourth quarter of 2010 to 46 in the first quarter of 2011. Even the confidence of supply chain companies has fallen, albeit less so, from 61 to 54,
	and when asked why the fall was less sharp, they said it was because their business was now much more international and they expected to pick up business elsewhere that they would otherwise have lost in the North sea. That gives a clear indication that the industry is facing a loss of confidence as a result of these changes.

Malcolm Bruce: The fact that I am moving the amendment makes fairly clear what I think and what I am trying to do. What I am saying to the Government—[Interruption.] I accept that the Government have introduced a Budget that has made these changes. What I am trying to engage Ministers to do is to understand that the industry is complex and that Government decisions might lead it to a review of investment, which I am going to suggest could lose production, jobs and export opportunities. It is possible to retrieve the situation, however, if we have an active process of negotiation. Previous Governments have made the same mistake in the past and realised the need to engage with the industry.

Geoffrey Robinson: The right hon. Gentleman makes a fair point about the lack of consultation and involvement with the industry in this heavy change that has been introduced on the hoof. The Economic Secretary, who is replying to the debate, having worked for three years as a senior executive in Centrica—a firm the right hon. Gentleman cited as having lost confidence—should have known better and realised the importance of consulting the industry beforehand.

Malcolm Bruce: At this stage, I am not here to attribute responsibility for the decision. My concern is—[Interruption.] With great respect, Members should acknowledge that, speaking as someone who represents a major North sea oil and gas constituency, I know my own industry and my own constituency, and I also know the need to engage the Government and persuade them that they can retrieve the situation to a degree by so doing.
	Let me refer to a table that will appear in the UK Oil and Gas publication tomorrow. It shows something of which Labour Members should be fully aware—the correlation with the past. Interestingly enough, in 2009, North sea oil prices peaked at $145, yet within 12 months they were down to $35. At that peak level of production, investment had fallen £3 billion a year as a direct result of negative tax changes in 2006. The time lag, Ministers should be aware, is two to three years, after which investment falls away; it is then several years beyond that when we see job losses, lost investment and lost opportunities.

Malcolm Bruce: I want to make a bit more progress.
	The Government have made their case, and have defended it. I am simply asking them to consider the real and legitimate concerns of the industry, to look at the independent assessments, and to accept that there is a danger of losing as much as £20 billion of investment and between 1 billion and 2 billion barrels of production over the next 10 years or so. That is a Forties field that we would simply discard. It would be a huge loss, and it would be very significant in the context of the British economy. If that investment is lost—or, indeed, secured—future jobs, export opportunities, reduced imports and future tax revenues will be affected. They all hang on the restoration of that trust, and on the industry’s being persuaded to invest in the marginal projects that might be put at risk in the absence of negotiation.

Malcolm Bruce: I think, hope and believe that Ministers do understand it. That is one reason why I believe that if they do engage constructively with the industry we will get some progress and reforms that will enable the confidence to be restored and investment to be brought back.
	Amendment 15 acknowledges the fact that the gas price is well below the oil price and the Government’s own trigger price of $75; $55 to $60 seems to be the average sort of price. The industry should not be facing the charge at all. There are also a lot of fields that have associated gas—in some cases quite significant sums—so this amendment simply suggests that that should be taken into account. One way to do that would be to tax the gas produced and the oil produced separately, and another would be to aggregate the two and take the average price; either way would be fairer. As has been said, Centrica is indicating that the UK does not look like a good prospect for it; the company is clear that it wants to diversify its investments elsewhere in the world, and that would be to our detriment.

Geoffrey Robinson: A series of reasoned and reasonable amendments stand in the name of the right hon. Gentleman and that of the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith). Does he not realise that the impression that would be left were he bought off tonight by some sweet sounding but meaningless words from this Tory-led coalition is that the Liberal party has a lot of responsibility but, sadly, absolutely no influence in the decisions being taken?

Geoffrey Robinson: I do not wish to delay the House, but I must ask the right hon. Gentleman: when did the Labour Government of 1997-98, when I had some responsibility for sounding out and consulting the industry, make any mistake such as has been made by this Government? We
	simply did not do so. We talked to the industry; I met John Browne and he explained the situation. Although we were prepared to do so, we did not even get into any formal consultation because he convinced us in the initial soundings that it would be the wrong move to make.

Malcolm Bruce: The evidence suggests that sudden step changes to taxes have been made by successive Governments and they have had the same effect: a drop in investment. [Interruption.] No, it has happened under Labour too—the party was in power for 13 years. The figures produced by Oil & Gas UK show that the last time this happened, capital investment dropped by £3 billion per annum over the subsequent three years, and that is a huge sum. Although negotiating field by field is a long drawn out and time-consuming process, too complicated for some investors, who will go elsewhere, that is preferable to simply standing one’s ground and waiting for the worst to happen.
	I hope that the Government will acknowledge that some projects are bound to be delayed or cancelled because the rates of return after the tax changes make them simply unviable. If the companies can negotiate to demonstrate to the Government the level at which such projects would become viable, which requires both parties to show hands, capital allowances or other mechanisms could be brought into play in ways that would benefit both the Government, because the investment, jobs and spin-off could be secured, and the companies, because they would be able to develop viable projects, which of course will subsequently pay taxes to the Government.

Kerry McCarthy: It is always a pleasure to follow the right hon. Member for Gordon (Malcolm Bruce). He has made an eloquent case on behalf of his constituents, who are directly affected in more ways than most people by the Government’s proposal to increase the supplementary charge on North sea oil to 32%. I will speak in favour of amendment 10, which simply asks the Chancellor to produce, before the end of this September, an assessment of the impact of taxation of ring-fenced profits on business investment and growth, including an assessment of the long-term sustainability of oil and gas exploration in the North sea.
	The amendment should not be at all controversial, although we saw in the debate on the last group of amendments that the Government were not happy to be asked merely to produce an assessment of the impact of that policy. That is surprising because, after all, the Government say that they want more consultation and more transparency in their tax policy making. They say that they will—I am quoting their tax policy making document—
	“embed impact analysis in the policy development process”
	and
	“integrate impact analysis into the consultation process.”
	Those are both the kind of sentences that one has to read several times before one can work out quite what they are on about, but my understanding is that the Government are trying to say that they want more transparency and consultation. We have had to table amendment 10 because, in reality, none of that has happened.
	The Government are right to consider increasing taxation on sectors of the economy that are enjoying windfall profits. We did the same when we were in government. There is an urgent need to deal with the fiscal deficit that is recognised on both sides of the House, and it is right that we should ask for more from those who are able to pay, but this change has been rushed through without consultation, as the right hon. Member for Gordon said, surprising the industry, and inevitably it has fallen down at the first scrutiny.
	If the Economic Secretary had consulted the industry, they might have told her that the stability and predictability of the North sea tax regime is important for investment. Oilfields are long-term investments that require long-term certainty and stability to attract investors. The industry believes that the value of investments in UK oil and gas
	has fallen by 24% as a result of the 2011 Budget. That will cause long-term damage to the industry’s trust in the Government for short-term political gain.
	I agree with the Select Committee on the Treasury, which said:
	“The decision to increase the supplementary oil and gas levy by 12% without warning, less than a year after the Government had undertaken to provide a ‘stable’ tax regime in the sector, may weaken the Government’s credibility in seeking to establish a stable tax regime in this and other areas.”

Kerry McCarthy: Certainly, when I met Oil & Gas UK, it was very surprised and seemed to be of the view that the Treasury had forgotten that gas would be affected by the measures. The policy is very much back-of-a-fag-packet stuff. It seems that, in a knee-jerk reaction to the rise in public concern about petrol prices, the Government felt they had to act on that front, and so had to came up in haste with some sort of mechanism to raise revenue to fund the 1p cut in fuel duty. The effect on gas is an important issue, and the cost could end up being passed on to ordinary people in their gas bills, either because the increase itself is passed on to consumers or because UK gas production drops, meaning that we have to import more gas from abroad.
	Had the Minister consulted the industry prior to announcing the measure in March, it might also have reminded her that when the previous Government increased North sea taxation, they introduced measures to promote investment alongside that change. When we introduced the supplementary charge In 2002, we also introduced a 100% first-year allowance for capital expenditure in the North sea. That not only provided a buffer for companies to transition to the new regime but encouraged investment in UK oil and gas fields. When, in 2005, we increased North sea taxation again, we allowed further flexibility on the capital allowance. To maintain the stability of the tax system, we also gave a commitment not to increase the tax again in that Parliament. I wonder whether the Minister can echo that commitment today.
	It was right to increase taxation on oil and gas at a time of windfall profits, and now is also such a time, but we were conscious of the need to create stability for the industry and to maintain investment for the future. If this Government had thought their changes through, they could have taken a similar approach, but instead the effects of their hasty and ill thought out decision are already being felt. We have heard the reports about disinvestment in the industry. Centrica, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) has mentioned, has hinted that it might decide not to reopen its Morecambe Bay field, which produced 6% of the UK’s annual gas requirement. I wonder what the Minister’s former colleagues have to say about that. Statoil has suspended $10 billion-worth of investment in the Mariner and Bressay oilfields, which together hold reserves of 640 million barrels of oil. Research from Aberdeen university has gone further, suggesting that over the next three decades the Government’s tax change could slash oil and gas investment in the UK by £30 billion. Production could be reduced by up to a quarter, leaving the UK more reliant on imported oil and gas.
	This debate is not just about the profits of oil and gas producers. The oil and gas industry directly and indirectly supports 440,000 jobs in the UK. There are reports that at least 40,000 of those jobs are at risk because of the Government’s action, at a time when 2.5 million are unemployed, including an increasing number of people who have been out of work for longer than a year. The Government have a responsibility to act with extreme caution before putting those jobs at risk.

Kerry McCarthy: The Economic Secretary said that it had led to a drop of 0.8p at the pumps between 23 March and 28 March, which seems very selective. It is clear now that petrol prices at the pumps have gone up and that the Government have gained very little from their approach.
	In the run-up to the general election, both the current Chancellor and the current Prime Minister were clear that they would deliver on a fuel duty stabiliser. Voters were led to believe that the Government could and would act on that. However, in March, as we approached the Government’s second Budget, the Opposition pointed out that the fair fuel stabiliser was still nowhere to be seen. Even with fuel prices rising above £6 a gallon, due
	to the rising price of oil—the very situation that a stabiliser was meant to help with—the Government had still been unable or unwilling to act. That was because their original plans would never have worked.
	The Conservative party had believed that rising oil prices led to higher tax revenues for the Government, which could then be shared with motorists. It turned out that, just like the proposals we see in the Bill, they had been poorly thought through. They were told that they were wrong not only by Labour Members, but by the Institute for Fiscal Studies, which stated that
	‘the claim that the Treasury receives a windfall gain when oil prices rise that it can “share” with motorists is incorrect.’
	They were told that they were wrong by the chair of the Office for Budget Responsibility, Robert Chote, who said it
	“would be likely to make the public finances less stable rather than more stable.”
	They were even told that they were wrong by the current Secretary of State for Business, Innovation and Skills, who said before the election that the fair fuel stabiliser would be
	“unbelievably complicated and unpredictable.”

Andrew Gwynne: My hon. Friend is making a superb case about the short-termism of the Government’s approach, and is she not absolutely right to point out
	that, in a short-term fix on gas and oil, this discredited Government are going to risk jobs, industry and investment in this country?

Andrew Gwynne: The hon. Gentleman has made a superb point about the Morecambe bay gas field. Is it not crazy economics that that investment will be lost to north-west England, which has some of the most deprived communities in the United Kingdom? We need to nurture the investment in the Morecambe bay gas field, not drive it away and import gas from abroad.

Robert Smith: I remind the House of my entry in the Register of Members’ Financial Interests as a shareholder in Shell, and of my wider interests in the oil and gas industry.
	The oil and gas in the North sea belongs to the nation, but unless we have a regime that attracts experts with the finance and knowledge we need, we will not benefit from it. One of the amendments before us would restrict the tax raid to a year, to ensure that the Government and industry can engage in constructive dialogue that will encourage investment. It is important to restore confidence in the tax regime. Following previous supplemental changes, Governments had to work very hard to restore confidence and bring back investment, with field allowances and other incentives. They engaged with the industry and provided assurances that once the tax change had been made at the beginning of a Parliament, it would not be revisited until the next election. There is scope for restoring confidence, but some hard work will have to be done.
	The Government need to address some of the arguments that are being made, particularly the one advanced by my right hon. Friend the Member for Gordon (Malcolm Bruce) about what individual investors are getting for their investment. It has been put to me that people made a decision to invest last June, but now the price of
	oil is $125 a barrel. If they decided to invest and then hedged for this year at $88, they are not getting $125, because the hedge fund is getting the profit. I do not see a tax being brought in on hedge funds; instead, it is being imposed on the people on the ground doing the hard work, on the skilled labour and on the knowledge and risk-taking.
	When we talk about windfalls, we have to be slightly careful in the case of an industry with a fluctuating commodity price. When the price goes up it makes more profit and when the price goes down it makes less, but Governments tend not to say, “We’re a bit concerned that the price has fallen, so we’re going to cut the tax.” If there is a one-way ratchet, that causes uncertainty and concern in the minds of investors.
	Amendment 13 suggests that if there is a desire to have a profit-related tax that varies with the price of oil, there should be some predictability to it. The hon. Member for Aberdeen South (Dame Anne Begg) said that it would cause complication, but that complication could be factored into new financial modelling. If there was a variable rate of profits tax, any company making an investment decision could factor that in and know where they stood in the fiscal regime.
	It has been put to us that other countries, such as Norway, have different fiscal regimes for investment. However, Norway has had a stable long-term fiscal regime with very little change, and it has also had the attraction of less mature, bigger finds with more upside for investors. It is important to understand the confidence element.
	The Energy and Climate Change Committee has seen evidence on the wider future of our electricity and gas network. This country wants to attract £200 billion of investment in its energy infrastructure, but if investors are being asked to build a massive offshore wind farm that will bring in more profits if the price of carbon goes the way they are betting, they will look across and see what has happened to the oil industry. They will not want the Treasury to come along and say, “Electricity bills are rising, so we’re going to put a windfall tax on the offshore wind farm,” which would undermine that investment decision. There is a read-across from gas and oil to wider investment in energy and big infrastructure projects in this country.
	This is not just a constituency matter for my right hon. Friend the Member for Gordon and myself, who have many constituents who work in the industry, have jobs related to it or are economically affected by it. As has been said, it also affects East Anglia, Morecambe bay and other areas. The supply chain permeates the whole of the UK economy.

Helen Goodman: It is a great pleasure to take part in this debate and to follow the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), who made such a reasonable, well informed speech.
	One question that has remained unanswered tonight is why the Government chose such a complex route rather than a much simpler windfall tax. Everyone understands that when the Government are looking for sources of funds, they will look at particularly profitable industries. However, the structure they have chosen means that investment in and the future of the industry have been brought into question. A far simpler structure would have raised the money without risking future work in the North sea oil and gas sector.
	The Red Book is peculiarly unclear. The supplementary charge was raised from 20% to 32%, but the Red Book states:
	“As part of the fair fuel stabiliser, if in future years the oil price falls below a set trigger price on a sustained basis, the Government commits to reduce the Supplementary Charge back towards 20 per cent on a staged and affordable basis while prices remain low.”
	However, the meaning of a “sustained basis” for a fall in prices and of a “staged and affordable basis” is not set out in the Bill.
	It is particularly important that Ministers explain why they chose an oil price of $75 per barrel. It would really help the Committee to know what the Government’s forecast is for oil prices. They say in the Red Book that oil prices are extremely volatile, which of course is true, but what model are they using for forecasting? Twenty eight years ago, I was a junior official in Her Majesty’s Treasury, and I worked on something called the POP forecast. The POP forecast was not about lemonade, but the prospects for oil prices in the long term. This model looked at the back-stop price for oil—in other words, the cost of making oil from coal—and at the time we estimated it would be $60 per barrel. What underlying model do the Government use for forecasting oil prices now? Are they looking at the cost of getting oil from shale? Are they looking at the cost of getting good-quality oil from, for example, Orimulsion? What is their model for forecasting oil prices?
	As is evident to everybody who has been in the Chamber for the past six months, the situation in the middle east and north Africa is particularly unstable, yet despite the current instability in the oil price the forecasts for revenue in the Red Book show a pretty constant level of revenue over the five-year period. Are the Government assuming that the level of oil prices will be constant over this five-year period? That seems to be an incredible assumption.

Helen Goodman: That is absolutely right. It is extremely worrying for the gas industry that the tax is being linked to fluctuations in oil prices, yet gas prices might not only vary from oil prices, but possibly even be going in a different direction. This is an extraordinary approach
	to take to the taxation of one of our major industries. I hope to hear from Ministers about how they are forecasting oil prices over the period in the Red Book.
	Returning to the issue of complexity and why the Government chose such a complex structure, we have to ask ourselves whether they completely misunderstood the debates in the previous Parliament on stabilisers. The Scottish National party and the Liberal Democrats proposed stabilisers on petrol taxation, but that seems to have been translated into the wholesale market. The situation now is not that stability is being provided for the consumer, which was the original objective of a stabiliser, but that the Government are able to hedge their tax revenues, which is a completely different proposition altogether. I hope that in responding to the debate the Minister will be able to explain what a sustainable oil price reduction means, because it is certainly not clear from what we have seen so far.
	The other thing that was said at the time of the Budget was that the detail would be agreed with the industry and motoring organisations. I hope that we will get a report from the Minister on what discussions and agreements have been achieved. The initial press reports of her meetings with the industry were very alarming indeed. It sounded as though the industry was furious with what had happened and that Ministers did not have a proper answer to its serious concerns. It would be nice to know whether the negotiations have developed, although it seems from what we have read even today in the newspapers and on the web that they have so far not been fruitful. It would also seem that the Government, in their headlong rush, are not taking account of the fact that further evidence has yet to be given to the Select Committee on Energy and Climate Change. Indeed, that evidence is to be given only tomorrow, yet the Government are ploughing ahead, mindless of what the industry is telling them.
	It is particularly worrying that, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) has pointed out, Centrica is saying that it might not open up the Morecambe bay field after the annual shutdown to perform the usual maintenance functions this year. The Morecambe bay field has been in operation for, I suppose, some 40 years—I think it was the first gas field from which we got natural gas in this country. The Minister is too young to remember the huge investments made in the 1960s to move from town gas to natural gas. Huge investments were made in this country to secure those gas supplies, and yet at the stroke of a pen, this Government are putting them at risk.
	When the Government say that they want to rebalance the economy, we have to ask whether they even know that means. I understood rebalancing the economy to mean having fewer resources in financial services and more resources in other sectors.

Helen Goodman: I entirely accept your guidance, Mr Hoyle.
	There is obviously a supply chain for the oil and gas sector. Equally obviously, if we damage the financial viability of the oil and gas companies, there will be an impact further down the supply chain. It is worrying that the industry is predicting that 40,000 jobs will be lost. Those are 40,000 jobs that we can ill afford to lose at this time. This is absolutely typical of the measures being taken by the Government that, across the board, are not being thought through. This is another example of that. The statement by Statoil that it is going to put on hold a $10 billion investment is very worrying.
	We also need to pay attention to the fact that the North sea province is different. It is not only a mature province—we all understand what that means—but it is in a very competitive arena. The Government do not appear to understand what being in a competitive arena means, or that those companies have a choice about where they invest.

Helen Goodman: No, Centrica is a gas company. Oil companies, even if they do not have petrol companies within them in the UK, are selling their oil and gas to people who are delivering in the retail market. I would have thought that the hon. Gentleman understood that if something is being done with prices and taxes in one part of the market, it could have an impact on the prices charged in another part of the market. That was my point.
	Let me deal now with the drafting of the Bill. Will the Minister explain why the $75 a barrel limit is not specifically mentioned in clause 7? As already mentioned, if we are to make any sense of what is going on here, we
	will need to look at clauses 61 through to 64 and at schedule 15 alongside clause 7. I would like to pay tribute to Rob Marris, the former Member for Wolverhampton, South West who always enjoined us to read the explanatory notes. The explanatory notes on clause 61, which deals with decommissioning, are particularly interesting. Has the Treasury or Revenue done any analysis of the impact on the environment of the changes to the rate of decommissioning relief.
	The amendments in the group are also interesting. As I have said, the amendments tabled by Liberal Democrat Members are clearly aimed at improving stability, predictability and transparency. The amendments tabled by my hon. Friend the Member for Bristol East (Kerry McCarthy) are designed to review and understand the situation better. The most interesting amendment before us, however, is amendment 11, tabled by the Chancellor of the Exchequer. It is designed to insert the following provision into clause 7:
	“But if the basis of apportionment in subsection (4)(b) would work unjustly or unreasonably in the company’s case, the company may elect for its profits to be apportioned on another basis that is just and reasonable and specified in the election.”
	This is the most extraordinary amendment that I have seen in six years as a Member of Parliament. It seems that every company can say to Her Majesty’s Revenue and Customs, “The impact on another company might be ABC, but in our case it would be XYZ.” Every company will be allowed to negotiate not simply the interpretation of the tax code, but its own tax code.

David Anderson: I want to speak in support of amendment 10, but first I want to say something about the speech of the right hon. Member for Gordon (Malcolm Bruce). I
	am pleased that he has returned to the Chamber, because I was very interested in what he had to say. Most of those who have spoken in the debate on these amendments have done so on the basis of a degree of experience, which was not the case in earlier debates.
	I wonder whether the case made by the right hon. Gentleman was made to the Government before the Budget. It appears from what was said by him and by the hon. Member for Dundee East (Stewart Hosie) that the industry has been saying to the Government for some time, “If you are going to do this, please talk to us and please make sure that we get it right.” The industry does not want to end up with the circumstances described by my hon. Friend the Member for Bishop Auckland (Helen Goodman), in which anyone could do whatever they wanted whenever they wanted.
	If that information was shared with the Chancellor before he made his statement on 23 March, it would seem from what was said by the hon. Member for Dundee East (Stewart Hosie) about why he had ignored the voices of experienced people such as the right hon. Member for Gordon and those in the industry that the only thing that matches the Chancellor’s arrogance is his ignorance. Clearly he has decided to say, “I know better. I will impose this on the industry and on this country.”
	This is not just about places such as Aberdeen and the north-west, because a huge amount of work is going on across the whole of Tyneside and the north-east of England. Some of the most advanced technical work anywhere in this country is being done there in very small factory units by very skilled men and women who are doing a great job. Shipyards have reinvented themselves after the closure programme of the 1980s and are building exploratory rigs and doing work that is vital to maintaining the skills base and developing the new work that we want to do. That will be development for not only the oil industry, but the offshore wind industry.

David Anderson: My hon. Friend is absolutely right about that. There is no doubt that as we move further forward and the exploration starts to take place west of the Shetland Islands, presenting new challenges, our people working in these industries will again lead the way. But that may not happen if companies are frightened away by a tax regime that is going to punish them. It will particularly punish them when it is a rabbit pulled out of a hat at the end of a Chancellor’s Budget, when it has not been discussed with the industry and when the industry has not been able to prepare, consider what it is doing and talk things through in a sensible and adult way in a genuine partnership to make these things work. As has been pointed out a number of times, Centrica has said this week that it is considering not reopening its gas fields off our north-west coast. That is a hugely important area of development and if Centrica decides not to reopen the fields they will just become sterile, like so many other of our energy reserves in this country over the past 30 years as a direct result of Government failures and inaction. It is clear that the Government have not thought this measure through, and the plea by the right hon. Member for Gordon is absolutely the right one, because they should think it through.
	What will happen to the tax revenue in the meantime? That point was raised by my hon. Friend the Member for North Durham (Mr Jones). Clearly, the decision made on 23 March was that a certain amount of money would be raised by this attack on the North sea. If that money is not raised, either because of the discussions that go on or because the decision has changed, what will the Chancellor come back with? How will he fill the hole that will be left, at least temporarily, if we do not go ahead with the measure?
	This decision has clearly been made for political gain. The Chancellor was on the back foot—he was on the run—because he had been knocked all over the place by the shadow Chancellor’s attacks about the impact that oil prices, petrol prices and, in particular, VAT on fuel were having on ordinary people and businesses in this country. As the Chancellor would not reverse the VAT on the petrol price at the pump, it was clear that he
	would have to find another way to fill that hole, and he did it through the rise in the North sea oil tax. It was clearly a huge mistake, made to cover up another political mistake. The mistake was not just the act of putting up VAT, but that of introducing a measure that was not supported and was in neither Government party manifestos nor the coalition agreement. Again, the proposal was sprung on the British people as well as the industry. There was no consultation with the industry, and when one says to a body such as Oil & Gas UK which represents a group of companies that the effective tax rate on their profits will be 81%, it is clear that they will go and look elsewhere in the world. If they can get a better return, that is where they will go. We should have been discussing that with the companies before they went.
	It is plain to see that this measure has been a huge mistake—but I would say that. The criticism does not just come from me, however. I understand that the Treasury Committee is going to hear from a group that has been asked to report to it on the impact of the change in tax on offshore drilling to 32% from 20%—I was going to say that it would do that tomorrow, but it is probably today by now. One body, the Institute of Chartered Accountants in England and Wales, was critical of the North sea policy because it could deter investment in the area. It said:
	“We understand the policy rationale for this decision but imposing unexpected tax charges with immediate effect is likely to cause damage to the UK’s competitiveness.”
	The Association of Chartered Certified Accountants adds its disproval, saying:
	“The increase in the rate of tax on ring fenced profits…was unexpected, and is understood not to have been subject to any consultation”.
	It goes on to say:
	“While the measure is clear, simple and targeted”—
	clearly it is, as the Government just need to say to somebody that they will pay 20% today and 32% tomorrow—
	“it fails on the principles of stability and supporting growth”.
	The Conservatives lecture us constantly in the House on the idea that they are all about developing growth, but ACCA clearly does not think so.

Kevan Jones: Let me begin by congratulating the right hon. Member for Gordon (Malcolm Bruce) and the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) on their amendment. They clearly care about the industry, know a lot about it and are arguing vociferously on behalf of their constituents. From the body language of the Economic Secretary and the Financial Secretary, it looks as though the right hon. Member for Gordon and the hon. Member for West Aberdeenshire and Kincardine are two unwelcome relatives at a wedding who had been forgotten about but turned up and started to argue about how this was not part of the wedding deal of the coalition.
	The amendments raise serious concerns about the effect of the Budget not just on the constituencies of the right hon. Member for Gordon and the hon. Member for West Aberdeenshire and Kincardine, but on many others throughout the UK. I would have expected Members on the Government Benches who have oil and gas interests in their constituency—Morecambe bay has been mentioned, as well as the gas fields off the coast of East Anglia—to speak in the debate, yet we have not had a single contribution from the Conservative Benches. That should be noted by constituents who rely on the oil and gas industry for their livelihood. I am sure that if the former Member for Morecambe and Lunesdale were still a Member of the House, she would have been vociferous in making representations on behalf of her constituents. I hope she is watching the debate, even at this late hour.
	The decision announced in the Budget to increase the supplementary charge on North sea oil was taken at the last minute, without any consultation with the industry. It led to the ludicrous situation mentioned by the right hon. Gentleman, with the profits of some of the mature fields being taxed at 80%. We are constantly told by the Conservative part of the coalition how important private sector growth is to the future of the UK economy.
	There is no better example than the oil and gas industry. It is an economic engine for the UK economy. In 2010 alone it invested some £6 billion into the UK economy. It creates and supports more than 440,000
	jobs, not just directly in the industry, but way down the supply chain and across the UK, as my hon. Friend the Member for Blaydon (Mr Anderson) noted. More importantly, it produced in 2010-11 some £8.8 billion in corporation tax for the Treasury, and it is estimated that for 2011-12, with the increase in the oil price, that revenue take will be about £13.4 billion. To treat such an important industry in the cavalier way that the Government have treated it is a disgrace.
	I feel for the right hon. Gentleman. He said that the Government were listening, but I am not sure they are. I ask him to look at the report of the Treasury Committee’s meeting of 29 March, where the Treasury said:
	“The 81% rate applies only to those mature fields where there is no further exploitation taking place that pay petroleum revenue tax. It is quite a high rate but, equally, there is not an issue with further investment needed there, and the oil is coming out of the ground. That is a pure”
	profit.
	Members asked whether that had been looked at in any detail. The Treasury went on to say that
	“the Treasury does a lot of work on all the tax levers on an ongoing basis.”
	It is clear from talking to the industry that investment in those mature fields is needed. For example, Total E&P UK says that production at mature fields will cease without further investment. The Alwyn area is a good example of why activity and investment need to continue. I accept that the industry requires a huge amount of start-up investment, but there is also an increasing need for investment over time. For example, Total has stated in its submission that investment is needed in the Alwyn field not only for ensuring that the field is secure and safe, but for living accommodation and other investments. It is absolute nonsense to suggest that such mature fields do not need continued investment, and to tax them at 81% or 82% is, frankly, ridiculous.
	Another point, which has been mentioned by my right hon. Friend the Member for Croydon North (Malcolm Wicks) and the hon. Member for Dundee East (Stewart Hosie), is that as technology has improved we have been able to get more oil and gas out of what in the past would have seemed very mature fields. That is happening not just in the UK, but internationally. Through this short-term fix to try to sort out the issue of fuel prices, we will leave oil and gas in the ground. As my hon. Friend the Member for Blaydon mentioned in relation to the coal industry, after stepping away from such resources we cannot simply go back years later and recover them. It needs to be extracted now, which leads to the point about security of supply for oil and gas.

Helen Goodman: Does my hon. Friend not agree, as the hon. Member for Dundee East (Stewart Hosie) said, that there is also—

Kevan Jones: There is indeed. There are also new technologies. For example, the development of mine ploughs for mining the North sea bed for the laying of oil pipes was generated from a company that spun out
	of Newcastle university. Places such as the Walker technology park sustain offshore supply jobs for the North sea, and two companies based there—Duco and Wellstream—produce 90% of the world’s capacity of sub-sea umbilical housing and cords. Those are well-paid jobs. Such companies chose to invest in the north-east of England not only because of the skills base but because of the access to the North sea, and they are now able to export from there across the world.
	George Rafferty, the chief executive of NOF Energy, says:
	“For the last six to nine months we have been talking about a renaissance in oil and gas especially from the North Sea and the benefit to our members in the North-East as a result of investment being put in. With this announcement by the Government, which was made without consultation with the industry, there is a serious risk those investment decisions will be reversed.”
	The industry body Oil & Gas UK said that the tax would not be passed on to consumers after the Chancellor warned that the sector faced a “direct squeeze” from it. That is exactly the uncertainty that exists today. It does not affect only the jobs in the north-east region itself. We have a large travelling population of individuals who travel to work via the North sea; they go across to Morecambe bay to work in the gas fields, and to East Anglia and other parts of the UK. That shows that this is an industry that affects numerous parts of the UK economy as well as the north-east. We have to ensure that any decisions that are taken on taxation do not have a huge detrimental effect.
	It is necessary to know what is going to be done when making decisions about where future oil and gas investment will go. Unfortunately, some companies have already invested in oil or gas fields on the basis of what the tax regime was going to be pre-Budget, and they now face a completely different set of circumstances. For example, Total E&P UK has established Laggan-Tormore—the west of Shetland gas development—and that investment of $4 billion is now at risk. Questions will be asked of the individuals who made the decision to invest there. What will be the future of that type of investment?
	This is clearly short-termism for reasons of political expediency to do with the Chancellor. In the previous debate, we even got an admission from the Minister that the downturn in the petrol price was 0.8%—and we all know what we can do with 0.8 of a penny in our household budgets! Is it really worth making that type of fix, which will jeopardise not only the investment that has gone in to date but will go in in future? This is a world-class industry of which we should be proud in the UK. It sustains many jobs. Over the years, it has been a leader not only in technology but in safety, which my hon. Friend the Member for Blaydon mentioned.
	I take no joy in what I am going to say now. I feel sorry for the right hon. Member for Gordon and the hon. Member for West Aberdeenshire and Kincardine, because I fear that they will feel the political consequences of this in the ballot box. I hope that with their expertise and continued lobbying, they can change the Government’s mind. A short-term decision based on the petrol price will have a huge economic impact on the UK, on the industry as a whole, and on the economy of the north-east. I urge the Government to think again. I do not know whether they will take silly decisions like this in the future, but please can they do a U-turn for the sake of the investment and jobs that they will put in jeopardy if they continue with this ludicrous policy?

Justine Greening: I only wish that the hon. Gentleman’s assertion was correct. The previous Parliament debated this very issue, and I think it was responsible of the new Government to get the independent Office for Budget Responsibility to examine it, given that there had been conflicting assessments from different industry watchers and think-tanks. The OBR was very clear that although we received some extra revenue from the North sea as a result of higher prices, the impact of higher oil prices is far more wide-ranging. We can see that from the debate that we have had over a number of weeks, which continues tonight, about the impact of oil prices as they feed through to high pump prices.
	I remind the hon. Gentleman of his own words about how to pay for the stabiliser back in 2009. He said:
	“That amount could come from the VAT windfall or the North sea windfall, because it would be directly related to the price of oil.”—[Official Report, 13 May 2009; Vol. 492, c. 908.]
	I know that he was talking about the direct revenues that he has just mentioned, but I think he was also making the broader point that a more general windfall accrues to the North sea industry when oil prices are high. I will talk briefly about some of the steps that we want to take to ensure that we mitigate the risks involved in the more marginal investments, so that we manage the concerns that have been raised, particularly by Liberal Democrat Members.
	Amendment 10, which was proposed by the Labour party and spoken to by the hon. Member for Bristol East (Kerry McCarthy), would require the Chancellor to
	“produce, before 30 September 2011, an assessment of the impact of taxation of ring fence profits on business investment and growth including an assessment of the long-term sustainability of oil and gas exploration in the North sea”.
	As I have said, I want to reassure hon. Members that we are engaged closely with the industry. In fact, we explicitly mention in the Budget document that we want to work with the industry on field allowances, particularly those on marginal gas fields. Since coming to power, we have engaged closely with the industry, as my hon. Friends are aware. We have introduced a change to the ultra-high-pressure, high-temperature field allowance to ensure that the fiscal regime was appropriate to those prevailing circumstances.
	The Government are keen to continue working with the industry. I have personally met Statoil and Centrica and spoken directly with them about their individual concerns. As I am sure the right hon. Member for Gordon is aware, Wood Mackenzie explicitly pointed to the Mariner and Bressay oil fields as two of the few fields where there would be an uneconomical impact, but for a variety of reasons, a number of technical challenges associated with those fields already made them a challenging investment. Nevertheless, we are working directly with Statoil to look at whether field allowances can be developed to help to unlock that investment.
	The Government published our assessment of the impact of the measure in a tax information and impact note at the time of the Budget. Although we do not expect the measure to have a significant impact on investment or production in the forecast period, as I have said, we are working closely with the industry. First, we want to look at field allowances to see how we can unlock those more marginal fields, and secondly, we
	want to look at the longer-term issues that the industry is keen to address, including, for example, achieving more certainty on decommissioning.
	Of course, the Government expect that the average post-tax profits per barrel will be higher over the next five years than it was over the past five years because of the higher oil price. In its analysis of the Budget, industry analyst Wood Mackenzie stated:
	“At current high oil prices, few new projects will become uneconomic as a result of the change”,
	However, we want to do what we can to ensure that investment is unlocked for those projects that remain at risk, so that they go ahead.

Justine Greening: I just said that we accept that there will be a marginal impact; however, Wood Mackenzie has said that it does not expect that marginal impact to be high. If we look at Professor Kemp’s optimistic scenario of $90, which is less optimistic than what the OBR is projecting, and then use the hurdle rate most commonly used by most companies, we see that in the high-price scenario, total future projects are expected to fall from 1,099 to 1,074—a 2% reduction. We are saying that we recognise that. We therefore believe that the challenge is now for us to work with the industry to ensure that we can mitigate the risk to that 2% of investment.
	I turn briefly to the amendments in the names of my right hon. Friend the Member for Gordon and my hon. Friend the Member for West Aberdeenshire and Kincardine. Clearly, the amendments enabled them to make the points they wanted to make, but I think they would accept that the way in which their proposals would operate could mean that the supplementary charge rise started later and lasted potentially for a finite time. It might also have a staged approach. All those things would mean that the funding would not be in place to fund the package we want to introduce for motorists. I stress, however, that as my right hon. Friend the Member for Gordon said at the end of this comments, the way through this is to ensure that we work with the industry. I am pleased with the engagement we have now had with the industry. We have got through our first meeting with industry representatives after the Budget, which was a chance for them to set out their reaction to a tax rise we did not anticipate they would welcome.
	The Government amendments demonstrate that we are engaged with the industry and are listening to its concerns. In fact, as a result of that engagement we wanted to address a technical issue that had arisen
	involving the basis proposed for the apportionment of profits. The Government’s amendments seek to address that. The legislation provides for how profits in an accounting period that straddles the date of the rate increase are to be split, so that the two tax rates can be applied to the appropriate amounts of profits. Government amendment 11 provides that a company may elect for a just and reasonable basis to be used where a time apportionment would give an unjust or unreasonable result.
	We have proposed amendment 11 to take account of the concerns of industry. The amendment has an Exchequer cost of £40 million in 2011-12 only. We feel that the change is worth while because it ensures, for example, that the tax change does not affect the tax liability due in respect of transactions that were wholly completed before the Budget and that should not, therefore, have been affected by the rate change. The change follows an approach that the industry has suggested and shows that the Government are willing to change the detail of the delivery of their stated policy aims where evidence of unforeseen effects is presented by the industry. I urge hon. Members to accept the change.
	This Government will carry on working with the industry on providing certainty in respect of decommissioning tax relief. Industry and officials will be engaging closely on that important piece of work in the coming months, and as previously mentioned, officials and Ministers are closely engaging with the industry in relation to the marginal field developments. We explicitly said that we would do that in the Budget, and we are now following up on that desire to ensure that investment continues to be unlocked. The concerns of gas producers are also being discussed with them. As I have mentioned, the Government are also seeking the views of oil companies and motoring groups about the level of the trigger price for the supplementary charge, and how the oil price for that purpose is to be determined. That informal consultation will be take place shortly, and we expect to be able to clarify the policy mechanism in the autumn.
	In conclusion, we want to ensure that the Exchequer obtains a fair share of the value of our natural resource wealth while ensuring that the tax regime does not impede the development of the basin’s potential. The impacts of the measure are understood, so no further assessment is required, and I urge the Opposition not to press the amendment. It is impossible not to note that they voted—[ Interruption. ] I was actually referring to amendment 10, which I would have thought Labour Members would recognise, having proposed it—although I suppose that anyone who has voted for a tax cut on fuel duty, even though they have no way of paying for it because they have set out their stall against getting the funding mechanism from the oil companies, might be expected not to have followed the arguments that I have set out.
	The amendments proposed by my right hon. Friend the Member for Gordon are well intentioned. Let me reassure him once again that we are listening to representations from the industry and acting to ameliorate unforeseen effects. I therefore urge hon. Members to accept the Government amendments. The clause puts in place a fair fuel stabiliser, ensuring that we can pay for much needed help for motorists up and down the country.
	The clause also ensures that motorists and businesses suffer less pain from high prices at the petrol pump as a result of higher oil prices that would otherwise simply increase the profits of oil companies.

Question accordingly agreed to.
	Clause 7, as amended, ordered to stand part of the Bill.
	[Continued in Column 635]
	[Continued from Column 634]

Tuesday 3 May 2011 (continued)

David Hanson: It is a great pleasure to be in the Chamber this evening, Mr Hoyle, for what I hope will be a fruitful discussion on clause 4, on corporation tax. As hon. Members will know, the clause reduces the rate of corporation tax with the aim of reducing it still further over the next few years. That has been done by Ministers because they recognise that there is a need for growth in the private sector, and that is an aim that we would support.
	We need to consider growth in the private sector, which is a key issue that we must examine in some detail. If time permits, which I am sure it will, I intend to outline the case for discussing the issues related to the need for growth in the private sector. We must examine how we use corporation tax to deal with unemployment, which affects the regions quite considerably, and how we compensate with private sector jobs for the Government’s massive cuts in public spending.
	Let us look in some detail at the question of the economy and unemployment in general. There is real concern about the level of unemployment in the country at large. The economic indicators show that there are currently ranges of unemployment across the United Kingdom that cause concern in relation to unemployment levels generally. One reason why the corporation tax cut has been brought forward is that the Government recognise that they need to look closely at how they can generate private sector employment by ensuring that we expand the private sector as a whole.
	If we look closely at the level of unemployment, we see great disparities across the country. In the north-east region—my hon. Friend the Member for Tynemouth (Mr Campbell), who is present, is a representative of that region—the unemployment rate is 10.2% and in the west midlands it is about 9.9%. Those high figures show that we need to develop the private sector. In London, the unemployment rate is currently about 9.4%. Looking around the Chamber, I see many hon. Members—

David Hanson: The hon. and learned Gentleman may say that, but this is an argument about corporation tax and if Members wish to participate in the debate I am very happy to stay here for as long as they wish to, because we can discuss this matter in some detail. It is very important that we discuss the circumstances in which we need to ensure that the growth in the private sector is undertaken by the Government—[ Interruption. ] I mean that the growth is encouraged. [ Interruption. ] Government Members know that there is a very important debate to be had about whether corporation tax plays a role in helping to grow the private sector. There is some synergy between what the Opposition and the Government
	believe on this matter, but we need to explore this in detail and I intend to do that. Hon. Members who have supported me in Committees in the past know that I will happily discuss these matters in detail for some considerable time if required. We need to consider what the current situation is, what the levels of unemployment are, what the need for private sector growth is when we are faced with massive public spending cuts and how to deal with those issues.
	If one looks in detail, as I intend to, at the statistics for jobseeker’s allowance, one sees that they currently show that the unemployment count increased by 700 in March 2011 and now stands at 1.45 million people aged 18 or over. The unemployment rate for International Labour Organisation-based measures of unemployment was 2.48 million in the period from December to February 2011. We need to look at how corporation tax and the proposed cut in it will ensure that we can raise the level of employment in the regions that have been particularly hard hit.
	As I have said, unemployment is 10.2% in the north-east, 9.9% in the west midlands and 9.4% in London. In the Yorkshire and Humber region—I can see Members from that region currently in the Chamber—the unemployment rate is around 9.3%, whereas in my region in Wales it is 8.7%. That rate is of considerable importance to my constituents and others across north-east Wales.

David Hanson: There are a range of reasons for those proposals. As part of the Government’s proposals to cut public spending across the board, there are major cuts which are unfairly hitting the north-east and other regions. I mention these issues because in the Minister’s justification for the reduction in corporation tax in the Budget proposals, he said that the Government were doing that in order to raise the level of private sector investment to attract businesses to the United Kingdom and keep them here through the corporation tax regime. Clause 4 provides the framework for generating growth in the private sector at a time when we face the loss of a possible 500,000 jobs in the public sector and great pressure on private sector industry.

David Hanson: If the hon. Gentleman reflects on the unemployment figures for May 2010 and May 2011 he will find that unemployment has risen in the past year. It has risen because of the policies of the current Conservative and Liberal Democrat coalition, which has ruthlessly cut public expenditure over the past year. The strategy on corporation tax before the Committee is one of a range of tools that we need to explore with reference to how the economy is to grow.
	It is important that we use this Finance Bill debate to examine the question of growth in the economy. The issue before the Committee is simply a corporation tax cut, which in itself is worthy of discussion, but we need to raise and consider other matters, too.

Kevan Jones: I sympathise with the constituency of the hon. Member for South Thanet (Laura Sandys). When such jobs are lost, it is important that Government, local government and others come together to rally behind jobs. In the north-east, there were numerous examples in the 1980s of the Tory Government doing nothing at all to replace jobs. In contrast, does my right hon. Friend agree that Nissan decided to produce the new Leaf generation of vehicles in the north-east at Sunderland not only because of its efficient and good work force, but because of the regional development agency, which the coalition has abolished.

David Hanson: My hon. Friend makes the point strongly. The funding for regional development agencies and for training grounds, which are being lost, and the £1 billion of public expenditure lost to the Welsh Assembly Government, was money that filtered its way into the private sector. We are now faced with a discussion about the £1.1 billion cut in corporation tax revenues in 2015-16, which is lost income to the Treasury. Ministers say that that will generate private sector employment across the board, with jobs being created and extra investment being brought to the United Kingdom. We need to know from the Minister what the trajectory of that job creation will be, where and how he expects jobs to be created, what his assessment is of the number of new businesses in the regions and whether he expects the corporation tax cut to be crucial in maintaining businesses in the UK.

Ian Mearns: The abolition of RDAs will be compensated by the reduction in corporation tax, but how will the Government calculate that? In my constituency of Gateshead, the economy is much diversified compared
	with the 1980s—there are many fewer large engineering companies and many more technical engineering ones. However, there is no sign that this gift, in comparison with the RDA offer, will bring the regeneration that the area greatly needs.

Paul Flynn: This is the second part of the debate; the first part on 17 March was interrupted when I could not take the line that the hon. Gentleman urges me to take without transgressing the rules of the House. Those rules need to be changed.
	Stephen Day, a former ambassador, talked about the ambassador in Doha as an example. His letter said:
	“We have an excellent ambassador in Doha and Sheik Hamad is the most accessible of rulers, in person and on the telephone. To use such an intermediary strikes me as crassly inappropriate… Of course the Amirs and Sheikhs engage with trade and finance, but this is generally done privately through agents and associates, not by principals directly. To use”
	an envoy
	“for such a purpose is seen by Arabs as crude and unworthy of our historic connections. It is quite the wrong way to promote our interests in this important region of the world and the sooner we are seen to have re-learned how to engage with Arabs the better.”
	That is what a greatly experienced ambassador says.
	There is an argument for saying that the role is of great importance and has great potential to promote our industries and that many thousands of jobs depend on the relationships we have with other countries. Are we doing this the right way? There is powerful evidence from human rights organisations and from the former ambassador that we are not and that we are losing ground because of it.
	Natasha Schmidt, assistant editor of the Index on Censorship, said people were angered by links between our trade envoy and President Aliyev of Azerbaijan, whose country is one of the most corrupt in the world. It routinely oppresses its own people and there are allegations involving torture of political opponents and rigged elections by Aliyev’s regime. There are also allegations by some of the employees of the agency of a close relationship with President Aliyev. Natascha Schmidt said:
	“It is absolutely appalling that the envoy would have such close links with Aliyev, an authoritarian ruler who has shown himself to be completely intolerant to criticism and is an enemy of free speech”.
	We live in an era of openness, transparency and scrutiny of appointments. A major advance are the pre-appointment hearings in the House, when someone going for a major job appears before a Select Committee to justify the appointment. That is wholly healthy and beneficial.

Edward Davey: The hon. Member for Newport West (Paul Flynn) has made a number of points that I do not think I can answer tonight, because they are not the responsibility of my Department. I consider that the question of whether he is gagged by the orders of the House is a matter for other House authorities, and I am sure that it will be dealt with in the usual way. I assume that he does not expect me to deal with those points. However, he managed to raise other important issues about the role of the special representative for international trade and investment, although I should say at the outset that I could not disagree more with his conclusions about that job.
	The hon. Gentleman talked a great deal about what he considered to be the problem of a lack of competition in the job, as if membership of the Royal Family were open to competition. I think most people will find that a rather odd position for him to take. However, I am pleased to note that he is now in favour of competition, as he does not often take that line.
	I, for one, believe that the Duke of York does an excellent job as the UK’s special representative for international trade and investment. He promotes UK business interests around the world, and helps to attract inward investment. He has been the UK’s special representative since 1 October 2001, and it is interesting that there has been no debate of this kind during the period of nearly 10 years since his appointment. During that time he has had a long-standing success in the role, representing a continued interest on the part of the Royal Family in supporting British business and international trade and investment.
	Since taking on his role, the Duke of York has built a substantial network of contacts at high level in both Government and business overseas. Those links help the duke to make a major impact in a range of markets around the world. He has made a valuable contribution in developing significant opportunities for British business through the role, and continues to do so.
	The hon. Gentleman could have talked about how he would assess that, and what evidence we could provide. Of course, it is often difficult to prove that a particular intervention by a particular person at a particular time results in a particular success. However, if we listen to the voice of British business, it is absolutely clear that it endorses the role of the Duke of York. Many who have worked with the duke have found that he is a real asset for our country in supporting UK business. A letter from a group of prominent business people published recently by The Sunday Times underlines the duke’s commitment to helping the country to respond to the current very difficult period for our economy through the work that he does in support of a trade-led recovery.

Edward Davey: My hon. and learned Friend is absolutely right and I can certainly agree with that. It is also worth pointing out that the Duke of York not only helps UKTI and with related activities but assists in the objectives of other Departments, such as the Foreign and Commonwealth Office and the Department of Energy and Climate Change, when he is asked to do so.
	The duke’s programme of visits is agreed by the Royal Visits Committee. A great deal of discussion and planning goes into deciding where His Royal Highness should visit and UKTI works with the duke’s private office to develop a programme of visits that complement the work and support the objectives of UKTI and make best use of the duke’s time to support the strategic aims and goals of Her Majesty’s Government. It is not a question of the special representative freelancing: he plans his programmes to operate within a strict framework. The programme is reviewed regularly and is confirmed alongside other overseas visits undertaken by other members of the royal family and by senior politicians such as the Prime Minister, Foreign Secretary and Business Secretary.
	The duke’s visits focus primarily on those priority markets for the UK where the duke is well placed to make a positive impact. His visit programmes generally include visits to priority markets in the middle east, south-east Asia, China, India, Russia, central Asia and South America, as well as to the US and other developed markets. The visits relate to sectors that are or will be key to the UK’s future export growth. They include financial services, energy, advanced engineering, information and communication technology, life sciences and creative industries.
	The duke has been visiting many of those priority global markets since 2001 and has developed strong relationships with key opinion formers and decision
	makers. For example, in 2008-09, His Royal Highness undertook nine overseas visits, visiting 16 countries. These involved 117 business engagements and openings, 27 political engagements and 28 with Heads of State. In 2009-10, His Royal Highness undertook 12 overseas visits, visiting 18 countries. This involved 163 business engagements and openings, 39 of which were political and 18 with Heads of State. This is a record of engagement that this House should recognise.

Edward Davey: I disagree. I have provided evidence rather than innuendo to show that the Duke of York is undertaking a very valuable role. Let us remember why
	the Duke of York does this role: because it is in Britain’s interests. It is in the interests of firms, their employees and our economy. The previous Government recognised that and so do we. We have inherited a sick economy where the prospects of growth funded by the public sector or by consumers are very limited, to say the least, after the poor management of the economy by Labour over 13 years. If we are to grow, there are only two sources of growth: trade and investment. Having someone with experience and clout as the UK’s special representative for international trade and investment is something that we throw away at our peril.
	I do not know what has motivated the hon. Gentleman. His timing is particularly inappropriate coming as it does four days after the royal wedding, when I believe the whole country showed the support that they give to the royal family and all its members. I am proud to be here to support the role of His Royal Highness.
	Question put and agreed to.
	House adjourned.